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PC prices will continue to go up due to shortage of components

PC prices will continue to go up due to shortage of components

Higher chip prices and a shortage of memory and SSDs are among the culprits driving up PC prices

PC prices are going up due to a shortage of a number of components, and the situation isn't expected to change in the coming quarters.

A shortage of DRAM, SSDs, batteries, and LCDs have conspired to drive up PC prices, Gianfranco Lanci, corporate president and chief operating officer at Lenovo, said during an earnings call on Thursday.

The cost of purchasing these components is going up, which is triggering PC prices to also rise, said Lanci, a PC industry veteran. The shortage of components like memory will continue, Lanci said.

As component supplies shrink, PC prices will rise, said Mikako Kitagawa, an analyst at Gartner. Moreover, PC makers are raising prices to squeeze more profits out of the shrinking PC market, Kitagawa said.

The PC buyer profile is also changing, with gamers and millennials willing to spend more money on PCs.

That's changing the mix of laptops, desktops, and 2-in-1s being shipped by PC makers, who are focused on selling higher-priced products that can deliver better margins.

But low-cost PCs won't go away, Kitagawa said. There will always be cheap laptops available, though those markets aren't growing and not attractive to PC makers.

Basic configurations of PCs remain affordable, but some PC makers are limiting customization, forcing users to buy additional components in certain configurations.

Take Dell's XPS 13, which is priced at US$799.99 with 128GB of storage, 4GB of memory, and a Kaby Lake Core i3 chip. Upgrading hurts the wallet. A base Core i3 model cannot be configured to 256GB of storage, but for that, you'd need a faster Core i5 chip and 8GB of memory, which drives the price of the PC up to $1099.99.

A 512GB SSD is available only with XPS 13 models with a Core i7 chip and touch screens that have a resolution of 3200 x 1800. That drags up the price to $1749.99.

A chart shown at an Intel investor conference last week showed PC selling prices reaching its highest since 2011, when a decline in PC shipments started.

Intel is also selling chips at higher prices, which is adding to PC costs. Intel PC chip prices went up by 7 percent in 2016, but the company also sold more Core i7 chips as sales of gaming and VR systems increased.

Analyst firm TrendForce predicted SSD prices would go up in the first quarter of this year, continuing a trend from the previous quarters. SSD adoption, as a replacement for hard drives, is growing, but the supply of NAND flash has tightened, which is driving up prices.

The price of DRAM is also going up because of shortages. Memory is a boom-or-bust market and extremely volatile with prices falling drastically when DRAM floods the market.

PC DRAM prices went up by 30 percent in the fourth quarter of 2016 compared to the third quarter, TrendForce said in a statement this week.

TrendForce is predicting that DRAM prices may increase by up to 40 percent in the first quarter, due to undersupply. The news isn't any better looking forward.

"Rising prices are expected for the second quarter as well," said Avril Wu, research director of DRAMeXchange, which is a part of TrendForce and tracks component pricing.

Lenovo's Lanci also expected the memory shortage and price rises to continue for the coming quarter.


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