Notebook computer prices, which have declined steadily over the course of the past two years, will plateau and possibly increase over the foreseeable future, due to an industrywide shortage of LCD screens.
Several major notebook vendors are bracing for the crunch, and it remains to be seen how dramatic the effect will be, but all agree that the shortage will have its impact on notebook pricing.
"I won't say it will definitely go up, but they will not be going down," said Eric Brennan, manager of new product marketing in the mobile division at Compaq.
The problem is not new and has plagued the market cyclically. The unique nature of the process behind making LCDs is at the core of the issue. Due to increased demand for large flat-panel displays for desktops and residual effects from the Asian financial crisis, LCD makers are pushing larger screens with higher profit margins to notebook vendors. But notebook makers are not sure they can sell 14 and 15 inch screens that add weight, size, and price to products in a market that is demanding lighter, thinner, and cheaper solutions.
"(Average selling prices) will not go down like they did last year because of the LCD supply and demand," said Tim Peters, general manager of worldwide marketing for the Latitude line of corporate notebooks at Dell Computer. "As a result, the value proposition as compared to desktops won't be as great."
But PC vendors are being hamstrung by the LCD market. "We are kind of being forced to sell products by what (LCD makers) are willing and wanting to make," Brennan said. "We think 13.3 inch screens are optimal."
But despite the needs of notebook vendors and end users, the market is being dictated by one supplier.
"I think 13.3 inch screens are too big anyway," said one IT manager of a Fortune 500 company. "Going beyond that size is a problem. I don't think 14 inch would add much value and in fact it may be a net loss."