PC prices are rising

When was the last time personal computer prices rose? 1996? 1994? You have to

go back to 1993, when 33MHZ 80486 PCs and one kilobit DRAMs were in vogue and

the World Wide Web was still mostly a lab experiment. The catalyst for the

sudden hike in PC prices has been the Taiwan earthquake, which brought IC and PC

motherboard production to a grinding halt for nearly two weeks. But, pressures

on PC component prices have been building for much of the summer.

Now, price hikes of 25 per cent or more in system memory chips are causing

companies like Dell Computer to cut back on DRAM in their computers in order to

avoid having to raise prices. Dell said that its memory costs have gone up about

25 per cent, adding about $40 in costs per PC for standard configurations. Apple

Computer essentially did the same thing by putting less powerful G4 processors

into its new G4 Macintosh systems. The net effect, however, less bang for the

buck, marks a major reversal from a trend that has caused average PC prices to

fall from more than $2000 to less than $900 in the last four years. Prices for

64 megabit DRAMs, for example have jumped on the spot market from $5 in June to

$20. As Taiwanese production has resumed, those prices have fallen back to about

$13. Strong laptop sales have also pushed up prices for the liquid crystal

displays by $100 to $200.

"For the first time in years, consumers will probably be better off

buying systems now rather than waiting for prices to drop some more, because the

computer you buy this month is probably going to cost more next month,'' said

Nathan Brookwood, founder of Insight 64, a market research firm based in Silicon

Valley. The price increases will not be limited to PCs. Video game players, who

tend to demand top-of-the-line graphics processors, will also have to shell out

more money to get the best performance. "Prices have already started to

climb, driven mostly by a shortage of key products,'' said Ron Potasner, chief

executive of graphics chipmaker S3 Inc.

Prices were already under pressure before the Taiwan quake. Intel sold 5

million more processors in the third quarter than they did in the second

quarter. That kind of increase is unprecedented and created a lot of pressure to

increase Memory and other PC component prices even before the quake in Taiwan,

said "In August, when PC companies came to us to place their orders, it was

already apparent that there was going to be much more growth in the last quarter

of the year then they had forecast," said Magnus Ryde, president of Taiwan

Semiconductor Manufacturing Co.'s North American division. "A lot of

contracts were coming up for review anyway, and some of our prices were below

our targets."