PC pricing depends on market demand, tecnologies used, routes to market, and brand value. It also depends on the components used in PC manufacturing, and their prices. In the past 20 months or so, trends in PC component pricing have experienced two major changes, with the expected strong -- albeit delayed -- effects on PC pricing.
We tracked the UK distributor list price or Dealer Buying Price level 2 (DBP2) for these components through 2009 using our PriceIT benchmark service. We saw a consistent, increase from one month to the next, with DRAM among the most strongest categories.
Component shortages caused wide-ranging price rises early in 2009 that worsened as the year progressed. Some component manufacturers had scaled back production too far in their bid to survive last year’s economic downturn.
According to our data, component prices increases across the UK carried on well into the first half of 2010 as the available supply consistently failed to meet demand. Eventually, although not the only factor in play, the rise in component costs ratcheted up actual PC pricing during the first half.
Effect of rising component costs
However, the effect of rising component costs on PC pricing was considerably delayed – in some cases by up to three months. Also, it did not affect all product categories to the same extent. Prices for desktop systems rose fastest, and standard-sized notebooks were more conservative, because deal fulfilment in this category was under much more pressure.
After around 18 months of consistent month-on-month component cost increases, those costs began to decrease again in the early part of the third quarter this year.
This enabled manufacturers to produce components more efficiently and pass the cost savings on to their customers. Weaker-than-expected demand in the run-up to the back-to-school season in August and September also contributed.
PC system prices continued to rise sequentially in the third quarter despite the decline in component costs over the same period.
Our PriceIT data suggests that desktop pricing went up by about six per cent in the third quarter from the previous quarter. Notebook pricing increased on average by just 0.24 per cent during the same period. Price rises for ultra portable notebooks are being countered by falling prices in the standard notebook category.
Assuming the usual three-month delay between component cost changes and their impact on PC system pricing, we would expect the latest component price declines to have no effect on PC pricing before the fourth quarter – bearing in mind that consumer sector price reductions might be held back during the first two months of the quarter to support special vendor promotions in the run-up to Christmas.
Also, PC price decreases might be somewhat counterbalanced again by the rise in VAT in January.
Closely monitor contract pricing
The commercial component price changes in the third quarter suggest that resellers should closely monitor their contract pricing. This way they can ensure that any component cost savings by vendors are passed onto them. Passing on current component cost savings is a great way to manage customer relationships or even win new accounts – even if actual system price declines, due to the delay in their implementation, might not take effect before the next technology upgrade in early 2011
