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Component costs keep PC prices high

Latest data from technology market research specialist Context has revealed that prices of PC desktops and notebooks are still affected by component cost increases, initially caused by the economic downturn.

Published on Feb 9, 2010

The Context PriceIT benchmark service, which analyses competitive pricing intelligence at local country and channel levels, shows that while component costs throughout the first half of 2009 decreased, the second half of the year saw a spike in costs which continued into and throughout the first month of this year.

“We should expect to see further price increases,” says pricing analyst Mathias Knoefel at Context. “Component manufacturers have been very cautious and have scaled back both production and investment. This has lead to a cost increase in key components necessary for PC configurations.”

On a standard notebook configuration, Context saw a component cost decrease of -9.4 percentage points within the first seven months of 2009. However, this trend was reversed, and the cost level recouped 4.5 percentage points up to the end of January 2010. Competitor market pricing for this configurations had shown a price decline of -7.4 percentage points up to July 2009. Due to the described increase in component costs, competitor market pricing also went up. By end of January 2010 it even managed to surpass the price level from the same month a year ago.

Amongst business accounts, a ‘desire to win deals’ has kept contract prices low so far, but the pressure is on the vendors not to lose more money on these deals. They are now looking into ways on how they can direct their pricing out of the loss-making level that they are in.

On the consumer side, Context analysts have reported a split developing between budget and specs, with pressure building on low end products to hit entry-level price points. Especially for the mobile PCs, the netbook products have left quite an impact on the pricing for notebooks, which left vendors lowering their entry-level price point.

“While the pressure is on to provide consumers with affordable home technology, gamers, power users and serious surfers are frequently willing to pay more with sales driven by the new multi-touch all-in-one systems based on Windows 7, seen by the success of for example the HP Touchsmart and Acer Aspire,” says Marie Christine Pygott, European PC analyst at Context.

“Going forward, we can expect this trend to continue as Windows 7 fully embraces the multi-touch functionality.”