Guangzhou HiVi's X3HT is China's first THX-certified home theater system. It has the X3F or three front channel speakers, the X3S or two powered subwoofers and the X3R or two rear surround speakers.

These southern and eastern provinces supply the bulk of China's output for both domestic and overseas markets.

China's home theater system industry has the support of about 400 active manufacturers with established field expertise in audio products and other allied product lines such as TVs and DVD players. There are also some makers from the components and manufacturing services sectors.

Nearly 80 percent of these makers are in Guangdong province, and own three-fifths share of the domestic market. The province is China's biggest manufacturing and export hub for consumer electronic products, thanks to its mature supply chain and proximity to export gateway Hong Kong.

Other home theater system suppliers are based in Zhejiang province, which is also the main base of operations of many component suppliers. Zhejiang's location in China's eastern seaboard known as the Yangtze River Delta region is also an advantage, as well as its proximity to Shanghai and its developed infrastructure.

In the audio industry, Guangdong has achieved a 4.9 percent y-o-y growth in speaker set production with volume at 49.7 million speaker sets as of November 2007. For the home theater system line, the province boasts the most number of makers with manufacturing bases spread across five of its major cities—Guangzhou, Shenzhen, Zhongshan, Huizhou and Foshan.

Guangzhou hosts nearly half of the home theater system makers in Guangdong. This supplier base includes many large-scale as well as foreign-invested companies that are mainly based in Panyu. Among them are HiVi Inc. and CAV Audio China Inc., two well-known home theater system makers in China. HiVi's headquarters and factories in China are registered as Guangzhou HiVi Electrical Appliances Co. Ltd. Being the province's capital invests Guangzhou with accompanying advantages, including one of the five top ports in the province, developed transport to surrounding component sourcing areas, and incentives for skilled human resources.

Shenzhen, by virtue of its special economic zone status, is another hub. Its location near Hong Kong and its modern transport system covering sea, land and air have attracted numerous makers, including component suppliers and export-oriented OEM/ODM service companies. Among its districts, Bao'an and Nashan have the most number of producers of home theater systems.

Another important sourcing base for speakers and related accessories is Zhongshan. One of its towns, Xiaolan, was named China's hardware industry base by the China Audio Industries Association (CAIA). In support of this designation, Xiaolan's local government has included the audio industry in its major economic strategies, lending support to the development of hardware, PCB and SMT, plastic and printing allied industries since 2000. Today, the town has nearly 100 companies engaged in audio-related manufacturing. Eighty percent of these makers each have annual sales of more than$700,000. MG International (Zhongshan) Co. Ltd with its established Avlight and Valle brands has its production base in Xiaolan.

Huizhou is another key city for audio products, being the site of one of China's eight state-owned A/V product industry parks. Operational in 1992 after 10 years of construction, the Huizhou A/V Industry park has attracted many TV and audio electronics companies like TCL Group, Desay Audio and Foryou Group. These A/V makers are among about 280 small to large-scale companies, including 36 engaged in high-technology products and those in component manufacturing, clustered in the area. In H1 2007, the Huizhou A/V Industry park achieved $4.4 billion in production value, $2.9 billion of which came from exports.

Another major industry park, the State Home Electronics Industry Park, is located in Shunde district in Foshan. It was established in 1986. For this, Shunde was accorded the title of the town of household electrical appliances by the China Household Electrical Appliances Association. Among the companies based in the park is Guangdong Xianqu Industry Co. Ltd, which is one of the first companies to have received A-grade certifications for their home theater products. Guangdong Xianqu is a major player in the home theater system and DVD player lines.

Zhejiang boasts a mature supply chain of electronic components for home theater system production, which include hardware and raw speakers, as well as woodworking facilities. This industrial environment has attracted makers of home theater systems to set up production plants in the province. These companies are mostly small- and medium-size private operations offering OEM services and entry-level products. The rest are established mainland, Taiwan and foreign-invested companies that have set up factories there.

The province's top five cities with varying involvement in the audio industry are the capital city of Hangzhou, which has the most number of audio product specialists; Ningbo, which is known for its speakers and PCBs; Jiaxing, for its electronic components and woodworking plants; Shaoxing, for its electroacoutic components; and Jinhua, for hardware and magnet materials.

Also called the city of electroacoustic components, Shaoxing has more than 200 factories providing electroacoustic parts, which are mainly based in the county of Shengzhou. Half of these facilities are privately owned. Combined, the city's production base for these products covers an area of 800,000sqm.

Shengzhou's total production volume can reach 6 billion electroacoustic parts annually, representing more than 80 percent of China's market. More than 50 countries, including those in Europe, Asia and Africa, source from Shengzhou. Shengzhou also has 300 companies supplying raw materials or complete packaging services involving foam, paper and molds.

Jiaxing has the Jiaxing State Mechanical and Electrical Component Park, an important electronic industry base in the province.With a total area of 20 million sq km, the park has six major business areas with three allotted for the audio industry—the Jiashan electronic components and wood processing area, the Haining magnetic materials area and the Jiaxing seaports area. As early as 2005, the park already accounted for 75 percent of the city's total ICT revenue.

China's home theater systems are produced by companies from diverse backgrounds. Leading the pack are audio specialists, followed by players from the TV, DVD player, component supply and manufacturing services sectors. The contacted companies, regardless of specialization, have been in the manufacturing business for more than a decade.

Guangzhou HiVi was established in Zhuhai city in 1991. It has two production bases, one in Panyu, Guangzhou and the other in Zhongshan. The Guangzhou facility handles cabinet making and full sets assembly, while the Zhongshan plant carries out speaker unit's design and manufacture. Both are certified under the ISO 9002 standard. The company claims to own the largest room for electroacoustic noise-cancelling testing in China, which has an area of 12x7.6x6.8m. Last year, these two factories produced nearly 10,000 home theater systems, 70 percent of which were midrange and high-end 5.1ch models.

As both Guangzhou HiVi's facilities are already producing at full capacity, the company began constructing a new manufacturing base in Jinwan district in Zhuhai in January this year. Once operational, this facility will be one of the world's largest R&D and production bases for speakers and home theater systems.

Acknowledged by CAIA as the producer of China's famous brand of home theater products, CAV has more than 1,800 franchised stores in China. Its brand products are also sold in more than 40 countries. Last year, the company exported between 50,000 and 60,000 home theater systems, half of which are 5.1ch sets. Sixty percent of its total production is for OEM or ODM clients.

Established in 1993, CAV used to be known as CAV Hanlin (Guangzhou) Electric Industrial Co. Ltd. As the audio market expanded, the company's investors set up CAV Audio (China) Inc. and a manufacturing base called CAV Loudspeakers Industrial Co. Ltd in 1998. At present, CAV's total factory space is 250,000sqm. CAV's products carry 3C, UL, CE, RoHS, KTL and COC approvals.

Jiaxin Tech Sound System Co. Ltd is an OEM-oriented and manufacturing service company. It has a 60,000sqm factory that handles all production processes in-house with the exception of painting. It sources most raw materials and components from domestic suppliers, but can accommodate buyers' request for alternative component sources. It can produce 7,000 to 8,000 sets per month, 20 percent of which are 5.1ch sets. Nearly 95 percent of the company's products are exported, mainly to the US. Jiaxin Tech partners with a sales company in the US to handle its overseas business.

Specializing in woodworking services, Hangzhou HaiLi Electronic Equipment Co. Ltd started producing audio parts and home theater systems in 1995. It has the capacity to turn out 1,000 home theater systems per month at its 25,000sqm, 150-worker factory. It exports 95 percent of its home theater systems.