How cheap can computers get before there's simply no money in making them any more?
In the most recent months computer prices have declined much faster than the typical 5% per year. During the 2008 fourth quarter the average price of a personal computer dropped about 14.3% according to IDC. In the past 15 years computer prices have only declined at a rate such as this or faster once, and that was during the .com burst, in the fourth quarter of 2001. At that time, IDC says prices dropped 14.5%
Due to the failing economy, consumers everywhere are scaling back their spending, opting for netbooks and any inexpensive computing device they can get their hands on. Some people are trying to abandon desktop upgrades in favour of putting their money towards full functioning mobile phone devices such as the iPhone or HTC Dream.
With netbooks available at rates
as low as $270 this price could completely change the technology as we see it today. Consumers are able to pack as much punch into their PCs as possible at a lower price than ever. Netbooks have always been inexpensive, however now they are becoming more powerful, and desirable. With items like built-in Wi-Fi, a webcam, larger screens, and bigger keyboards, they're satisfying notebook and desktop alternatives.
Companies like Freescale are in development with computers which could cost consumers a mere $199 or less. These should hit the shelves later on this year.
This is great for the consumer, but tech companies are beginning to see the pain. The larger PC manufacturers such as Lenovo, Dell and HP are barely making a profit on these ultra-cheap machines. The upset is spilling into the chip and monitor sales also. The declining price and competition is causing all computer companies to really have to step up their game.
Companies like Microsoft and HP are working hard to get a stronghold in the netbook market, but don’t want to damage their already decent full-size PC business, which typically makes a higher profit.
Telcos worldwide are beginning to offer consumer deals in which with the purchase of a wireless data contract, the computer itself costs nothing upfront. Vodafone Australia, for example, sells the Dell Mini 9 with 3G for $0 upfront on a
$59 plan for two years, which includes 5GB of data per month.
The positive side for manufactures is that the offering of inexpensive PCs could ultimately boost demand, thus delivering higher market penetration and the potential for a bigger upgrade base in the future. However, it's clear that it's not just consumers having to adapt to the tight economic conditions.