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PC Prices to Rise?
guinan writes "The Economist is running a story about how now that PC makers think the worst is over, it's high time to raise prices. In particular, the focus is on the steady price of flat-panels and a possible end to the decline we've seen in the price of memory. Granted, most of the /. crowd build their own boxes, but if you want to buy a computer from a major brand better go for one soon while you can still get all the perks."
Many people actively want to spend more. One of my relatively clueless neighbors asked me to bless his decision to spend $2700 on a new Dell. It was top of the line. I knew he did a bit of word processing and spent the rest of the time at home playing flight simulator games. He's not an avid, fast-twitch gamer. I tried to talk him into a $700 system. He wouldn't budge. He wanted to spend that much. He wanted to make sure it was "upwardly compatible" and "expandable", even though he would just spend another $2700 in a few years. There are plenty of suckers who have too much money. It's fine by me if the computer companies take it. The only thing that worries me is that they'll increase the cost of low-end systems that I like. It's been a long time since I did anything but basic coding and editing.
These are just usual rumours to get the people buy now, and not postpone. We've seen such manipulation over and over again (e.g. with memory prices, causing huge price fluctuations; there is always a group earning lots of money on price fluctuations).
Over time PC prices shall come down inevitably, there is no fundamental reason why progress of technology (enabling more power for same price or equal power for lower price) should stop any time soon.
Example: LCD prices are bound to fall sharply in the second half of the year. New production capacity comes available in big quantities in july/august (new generation plants, higher efficiency, less shortages etc). I guess some stakeholders want to push people into buying now (out of fear for price increases) to get rid of their old inventories.
The phrase "decline in the price of memory" comes from the submitter, not the article. According to the article (and the market), "the cost of some chips has been steadily increasing."
Oddly enough, the article points out that steadily rising component prices may actually encourage some companies (e.g. Hynix) to get back into a market they had recently abandoned, despite shrinking margins. It also mentions that since Dell tends to pass changes in component prices quickly on to customers (for better or, in this case, worse), that it may actually be a competitive disadvantage WRT Compaq or HP, since those companies sell to retail at somewhat fixed prices.
What a strange business - when technical innovation is the driving force in a market, the usual business laws don't seem to apply...
I used to build my own machines, but over time I discovered the advantage of having a manufacturer thorougly test all of the components together to make sure they worked well together.
I always wanted to believe that every component worked just as well with every motherboard, etc., etc., but they just don't. When the company who's selecting the components is also designing the motherboard they have a distinct advantage. Sure, this means that when I start upgrading individual components I don't have the same guarantee - but at least I did for my original system, and honestly once I start upgrading my video card or this or that, I'm really about ready for a whole new system anyways.
I really don't think prices will go up too much and if they do go up it will probably be a temporary increase. Look how much competition there is amongst the PC makers. The reason why PC prices are so low is because of the ease of entry in to the marketplace coupled with rapidly changing technology and a reduced consumer demand for the latest and greatest PC. Ten years ago, you had to buy a new computer every two years in order to run the latest and greatest software. Not so anymore, a Pentium II will run just about everything the non-gamer needs to run, plus I've seen some thrifty gamers running P-II's with not too much of a problem, besides a little wait.
t's only a personal thing, but as far as my own personal machines go, hand built is the only option. The advantages from having carefully chosen each and every component, exactly as required to do the job in hand are worth the few hours (good components/knowledge/luck permitting) it takes to build the thing. Even if I buy a system, the first thing I do is wipe the disks and start from scratch.
Also, I'm probably not alone in being a serial upgrader, I replace something in one of my machines about once a month, funds permitting. So, I haven't actually built a whole new machine for myself in 4 years, though the only original parts left from that machine are the keyboard and case (currently home to my Linux dev box).
However, I'd always go the way of prebuilt machines, preferably from one of a few big firms (I'm not going to plug ANYBODY) if I were putting a network together for people (something I do regularly), it's more for tech support and a good warranty than anything else.
You know, I used to think building my own box was the way to go. I'd get on Pricewatch and find the best motherboards, CPUs, etc. and build the whole thing. It used to be cheaper.
:)
Then my parents needed three new computers at once, and I decided to check out Dell Refurbished.
For $580 shipped (each), I got 2 computers with a 1.1GHz Celeron processor and one with a 1.6GHz Pentium IV. All had at least 128MB RAM and one had 256MB (I bought extra memory from Crucial.com to bring them all up to 256MB.) All had at least a 20GB hard drive, which was all my parents needed for the office. All came preinstalled with Windows XP Home (fine for office work.) And one came with a Firewire card; one came with a kick-ass video card. All had either Ethernet or a 56K modem (in card format, even, not built on to the motherboard.) All of this also came with free one-year ON-SITE hardware tech support from Dell.
I was a bit worried about the quality, since I've seen how Dell shafts its low-end users with shoddy parts. But the computers performed flawlessly upon arrival and have since, with no system crashes. Then, when it came time to swap out a CD-ROM for a CD-RW, I was truly impressed. Swapping out of a drive consisted of the following:
1. Unplugging the computer.
2. Pulling a thumb-tab at the top of the computer.
3. Pulling a latch that released the CD-ROM drive.
4. Unplugging the CD-ROM drive's cables.
5. Pulling out the CD-ROM drive and putting the drive brackets on the new drive (which just snapped on.)
6. Sliding in the new drive, plugging in cables, snapping case back together.
7. Plug in.
Done! No screws, no screwdriver, no nasty cheap ATX case with a hood you have to struggle with getting in the right place. Check out this picture to see what I'm talking about.
There was no way I could have built these computers, bought Windows XP, and had any money left over to profit at $580 a computer. Plus, I would have had to put them in an ugly case that would have caused hassle for me later.
I don't think it's economical any more to build your own computer. This is a GOOD thing -- it shows that computers have become a commodity. Do you build your own TV? Probably not. Microwave? Heck no. The quality to price ratio of pre-built computers is now such that even geeks are starting to buy pre-built computers. I, for one, am glad. Let Dell take over the hassle of being called when the computer has a problem. I'll spend more time doing things that I'd rather be doing.
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Prices will not go up. The main reason is Dell that is using this downturn to clobber their competitors. Notably Compaq.
Dell as the lowcost producer only needs to keep the level and the rest will try and fail. Then go back the old pricing.
This is being done in the Airline industry all the time. One of the major airlines sends a signal of higher prices waiting for reaction. If nobody follows they go down again, usually within days.
Dell wil not follow as they have publicly stated they will use this trough to gain share.
The PC price elasticity is such that pretty much price is the only thing that will spur market growth short-term. A hike will kill short term demand as no compelling reason for upgrading now rather than in 6 month time can be articulated.
There is no new "must haves" in the newer boxes and it will be a while. Dell is the major culprit here as well since they have less than half of the R&D than other majors. Around 2.5% if I remember.
Help fight continental drift.
I've always been a big fan of "build your own clone!" too - but it almost doesn't make sense anymore. Oh sure, from a "coolness" standpoint - there's really no substitute. That's only because LAN gamers and the computer "3lit3" turn up their noses at anything that isn't overclocked, hacked up with extra cooling fans, and has neon lighting inside of it.
If you're a regular or "power user", however, and want value for your dollar, the home-built clone is looking less and less viable.
In recent years, I've built several home-built clones for use at home, as well as used a couple of Dell systems. Neither Dell has given me *any* reliability problems, but all of the home-built PCs have. Conventional "wisdom" of the self-proclaimed PC gurus says "Oh, you need to use better quality parts!" Well, Adaptec SCSI controllers, Muskin memory and Asus motherboards haven't been the magic answer for me - so I'm not sure what they expect I should be buying instead?
Fact is, most clone cases use crappy quality power supplies. I had one literally go up in smoke while the machine was plugged in but powered off! (Before that, it worked fine for about a year - but 1 year before burning up isn't what I call quality.) Cases with *good* power supplies in them cost big $'s, making the system cost uncompetitive with companies like Dell or HP.
Then, you struggle with warranty issues. If I buy a name brand PC, at least I can buy an extended warranty that pretty much guarantees me free replacement of any parts that die for 3 years. Try that with a generic clone! You might get a manufacturer 3 year warranty on the hard drives, but that's probably about it.
One of my Asus motherboards constantly freezes up running Win '9x. With Linux, 2000, or XP however, it's fine. (I wanted Win '98 on it because I used it for MIDI and hard disk audio recording, and had some older software.) No amount of driver updating ever got it stable, even with the latest BIOS updates.
Of course, now, if you ask the same people that praised that board when I bought it, most will simply tell you "Oh, yeah - that chipset is screwed up. You need the new Asus model XXXX!" Whatever.... This kind of thing only happens to people building clone PCs. The name brand systems get returned as defective when they can't run a popular OS properly, so that's usually weeded out before they go on sale.