In the past few weeks, several high-profile PC vendors have raised the prices of their machines or gone to some lengths to absorb the cost of rising component prices.
Apple Computer announced price hikes of $US100 ($200 in Australia) on its iMac computers, citing the tripling of RAM prices and a 25 per cent increase in LCD technology.
Sony announced shortly afterwards that prices of its notebook computers would rise in the US and Japan, but Australia has so far been spared.
Apple Australia corporate affairs manager Myrna Van Pelt said Apple would rather raise its prices than attempt to either absorb the costs or decrease the quality and size of the components sold in its products.
Several vendors, including NEC Computers in Australia, have adopted the latter strategy. NEC Australia's general manager, Tim Falinski, said that a new line of desktops and notebooks were due for release, and instead of raising their prices, the low-level machines will have significantly less RAM to remain competitive on price. In a machine where a vendor might have placed 256MB of RAM in the past, 128MB will have to suffice until the price of RAM drops again. He said direct-selling PC vendor Dell Computer had undertaken a similar strategy.
"It is really a question of whether the buyer sees 128MB of RAM as enough on a low-level machine," he said. "You can always buy now, wait 12 months until prices have gone down again and then upgrade the RAM in your machine."
In the medium to high-end machines, Falinski said vendors are getting good discounts on optical drives and processors, which should offset the change in price for other components. "The price points on these machines should remain the same," he said.
David Heyworth, Compaq's manager for desktop access products, said that while supply constraints in displays mean costs have risen for vendors, Compaq's insulation policy would keep prices level in the short term.
"Instead of having different displays, we utilise a common display across our product base. It means as a vendor we are in a better position to negotiate supply and stabilise the pricing structure."
Heyworth said components prices across the board are increasing but this is mitigated by the value in the power of the system. For example, while the entry-level price of Intel's Pentium 4 chip will soon increase, so too will the clock speed. This is also the case with hard drives.
"There is still a far better price-to-performance ratio," he said. "We are getting around it by putting more value into the system."
A slightly higher Australian dollar and new form factors that take advantage of the cost savings of legacy-free systems were also keeping prices down, he said.
Dell Computer Australia spokesman Rob Small denied that the vendor would be using lower-grade components to remain ahead of the price game. He said that there were several components aside from memory products that are continuing to drop in price, so there should be no need to raise prices or use lower-grade components. "Overall, component costs drop about 1 per cent a week and we pass most of that on to the consumer," he said.
Small said that Dell's build-to-order model renders forecasts of component prices irrelevant. "When you build to order, the customer decides on what is in their machine," he said. "There is no better forecast than a customer's order.