How To Set Up A Business Unit For Manufacturing Surround Sound Systems

By Research Team, ComConnect Consulting


Demand for surround sound systems is increasing rapidly with more people opting to convert their living room into a home theatre for better audio-visual effects.

A surround sound system is a multiple-channel audio system that gives the same effect of a movie theatre sound in a room. In the basic form, besides normal stereo channels, it adds a centre speaker at the front to enhance sound clarity and rear speakers to add depth for ambience and special effects.

Surround sound expands the spatial imaging of audio playback from one dimension to two or three dimensions. This effect can be achieved by processing an existing stereo (two-channel) soundtrack to add the feel of spaciousness and make it appear as if it originated from outside the left/right speaker locations, which provides a more realistic audio environment. In the surround sound system, one can experience different parts of the soundtrack coming from different directions.

Generally, a home theatre system is designed to recreate the experience of watching a movie in a theatre. It produces more audio-visual effects than an ordinary TV. A surround sound system makes the home theatre experience complete.


Demand for surround sound systems is increasing rapidly with more people opting to give their living room the ambiance of a movie theatre through better audio-visual effects. It is not just music and movies that benefit; sports, drama and other programmes also become more involved, giving a genuine sense of actually being there.

Market potential

Growth of smart homes is one of the primary growth factors for the home theatre market. Smart homes are equipped with connected devices that communicate with each other and provide an enhanced consumer experience. Vendors are offering enhanced home theatre systems equipped with assistant functionalities for smart homes. Latest home theatre systems are being equipped with digital assistants like Alexa or Google Assistant, which make voice assistance possible.

Media streaming devices like Google Chromecast are connected to a high-definition multimedia interface (HDMI)-equipped receiver. Receivers or speakers inbuilt with Chromecast can be directly paired with Google Home. Market analysts estimate that this market will grow steadily at a compound annual growth rate (CAGR) of more than eight per cent by 2022.

Driven by growth in disposable incomes and housing, the retail market for audio equipment industry revenue has increased in the last five years. During this period, the number of households have increased in line with disposable incomes, representing a consumer base ripe for new audio equipment such as surround sound systems or soundbars for their homes.

Additionally, audio equipment quality has improved, and such equipment are now compatible with other electronics, benefitting industry operators.

Leading consumer electronics brands are manufacturing surround sound systems, and their products are aimed at a specific market. But there is enough potential for locally-assembled systems with lower costs (without compromising on performance) among price-conscious customers who are eager to convert their living room into a movie theatre.



Manufacturing process

Raw materials and equipment

 Main components of a surround sound system are audio processor, sub-woofer and speakers. Audio processor is the heart and provides most inputs and outputs to which components of the home theatre are connected. It combines the radio tuner and pre-amplifier that process AV signals from the source (CD/DVD players) to the TV, and correct amplifier channel and built-in multi-channel amplifier that send surround sound signal and power to the speaker system.

A subwoofer is a special type of speaker setup in a home theatre, which is used for the reproduction of extremely low frequencies present in movies or music. The audio processor inside the sub-woofer enclosure processes stereo signals into 2.1, 5.1 or 6.1 channels, and amplifies these to the required level, which is fed to output speakers. One of the main output terminals of the audio processor is sub-woofer out.

The home theatre system needs several speakers—exact number depends on number of channels needed for the setup. On average, it needs five speakers to ensure rich sound from all sides. To get theatre-quality effects, it should have three full-size front speakers.

Manufacturing equipment

The equipment needed in the production of a surround sound system are as follows:

  • Digital multimeter (3½)
  • Audio test system (consisting of distortion factor meter, signal generator, level meter and power meter)
  • Drilling machine
  • Tool kit, temperature-controlled soldering stations and accessories
  • Bench grinder (portable)

Financial analysis

Table I shows fixed capital, that includes land and building, and machinery and equipment. Table II shows the cost of working capital per month.

Total capital investment is given in Table III. Cost of production per annum is shown in Table IV. Estimated turnover per annum is shown in Table V.

Profit before taxes = Turnover per annum – Cost of production per annum

= 9,000,000 – 7,699,350

= ₹ 1,300,650


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