“Now is your chance,” reads a sign at the personal computer section of a Yodobashi Camera outlet in Tokyo’s Shinjuku Ward.
The message, which continues, “Prices have hit rock bottom,” may be more than just another sales cliche at the major discount retail chain.
With prices of key components seeing an unprecedented surge over the past few months, most domestic personal computer makers are planning to raise prices of new models in early May.
It will be the first PC price hike in Japan since the beginning of the current consumer PC boom, which dates back to the mid-1990s.
Computer industry sources say the primary cause for the price hike is a backlash from last year’s serious slump in the information technology sector, which prompted many component makers to drastically reduce inventories.
But some economists also say it may mean an end to cutthroat low-price competition among computer makers exhausted by a lack of profits — or even losses.
“The PC business was in the red last year,” noted Kenji Yoshimizu, head of the PC sales division at NEC Customax Ltd., NEC’s home computer marketing and sales unit. “We were able to absorb price fluctuations of components in the past by selling in mass volume, but we can’t do that any longer.”
In the second half of last year, shipment volume of NEC’s PCs stood at about 80 percent compared to the same period a year earlier. In value terms, sales were down about 30 percent, Yoshimizu said.
“We have no choice but to reflect (the rising) component prices (in the price of PCs),” he said.
Sony Corp., which has strong brand power with its popular Vaio series, was the first to announce in mid-March its plan to raise prices for new models to be released in summer.
Other major players, such as NEC Corp., Fujitsu Ltd., and Toshiba Corp., also indicated their intention to follow the move when they release new models over the next few weeks.
“Price rises of components are really abnormal,” said Junji Tsuyuki, senior manager at product planning department of Sony’s Vaio unit. “We haven’t experienced things like this before.”
According to Tsuyuki, prices of liquid crystal displays in January and February were about 30 percent higher than a year ago, and memory prices have tripled from levels at the end of last year.
As a result, a new version of the Vaio W, a desktop with a rectangular LCD, is estimated to sell for about 180,000 yen, up 20,000 yen from the previous version released in February, Tsuyuki said.
Computer industry analysts, however, are not sure if the surge in component prices will continue.
“Prices of memory have calmed down recently,” said Tsuyuki of Sony, “but I’m not sure about LCDs.”
Supplies of LCDs have tightened as notebook PCs adopt larger screens and demand for other mobile devices is also on the rise, he said.
Yoshimizu of NEC Customax believes the fierce price competition will continue even if component prices return to normal levels, given the existence of strong competitors on the market and the long history of the price war.
“I don’t think the reality of mass-volume selling with small profit margins will change,” he said.
But of course, PC makers are now struggling to earn more profits by releasing products with greater added value, instead of simply assembling imported components.
Sony Corp. was the first to announce price hikes, apparently confident of its Vaio series’ popular design and digital connectivity to other Sony products such as digital still cameras and audio components.
“PC makers whose main sales point is merely low price will find themselves in a very severe situation,” predicted Sony’s Tsuyuki.
Seiichi Katsumoto, sales employee at Yodobashi Camera’s Shinjuku store, also pointed to the recent changes in consumers’ preference to seek clearer features other than low prices.
More and more people have become accustomed to using computers, and those people have clearer ideas of what they want from their own PC, he said.
“If the design is cool, for example, they are willing to buy a PC even if it is priced at more than 200,000 yen or 300,000 yen,” he said.
Indeed, expensive but space-saving desktop PCs with LCD screens have become more and more popular recently.
Only 1 1/2 years ago, low-price PCs with bulky cathode ray tube displays accounted for about 40 percent to 50 percent of the home-use desktop PC market.
But now, the more expensive flat LCD models account for about 80 percent of the market, according to industry sources.
As a result, the average price range of home-use desktop PCs rose from 160,000 yen to 180,000 yen over the past year, according to NEC’s Yoshimizu. This signals a shift in consumers’ willingness to pay more for desktop PCs, rather than actual price hikes by computer makers.
Yasunari Ueno, chief market economist at Mizuho Securities Co., said rising PC prices and changes in consumer preferences may offer hope for the nation’s deflation problem.
He pointed out that the trend of price competition triggered by Uniqlo, McDonald’s and telecom carriers’ discounting race for the Myline priority connection service has already settled.
Consumers have even begun expecting rises in prices, as shown in a consumer sentiment indicator released by the Cabinet Office on April 23, Ueno said.
“The PC is just another daily product whose price is going up,” he said.
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