Compal Electronics, the world’s second-biggest contract PC maker by volume, has made a rare move to raise prices in reaction to the disruption in the technology supply chain after the Japan earthquake, rising wages in China and soaring prices for raw materials.
Ray Chen, president, said the Taiwanese company had begun negotiating higher prices with its customers, which include Acer, Dell, Lenovo and Hewlett-Packard, to protect its margins.
“Prices for raw materials such as copper used in printed circuit boards and cables have gone up. We started to notice a shortage this month for components such as hard disks, optical drives and D-Ram [memory chips]”, because of the earthquake and tsunami, Mr Chen said on Thursday.
The price increases, which analysts say are the first since 2008, present a difficult choice for PC brand companies. With demand still weak for notebooks and traditional PCs, there is “no way they are going to be able to pass this on to consumers”, said Jenny Lai, head of Taiwan research at HSBC.
Instead, those companies will either have to suffer a fall in their profit margins, or adjust the specifications of the computers they sell, such as providing only 2 gigabytes of Ram memory chips rather than 4 gigabytes, or not use high-end flat-panel screens that give clearer images, Ms Lai said.
That, however, may further sap consumer interest in notebooks and desktops at a time when tablets and smartphones are already affecting PC sales. Global shipments of PCs had already fallen in the first quarter of this year, contrary to expectations and the first decline since 2009.
The price rise also reflects how the cost pressures for the global technology manufacturing industry is coming from a number of disparate factors. Prices for certain components, such as capacitors, which act as mini-batteries, are on the rise because of lower production from Japan. Others, such as printed circuit boards, are more expensive because of copper and oil price increases. For the casings of notebook computers, which are now 10 per cent more expensive than at the beginning of this year, it is largely because of a rise in labour costs in China.
Compal did not disclose how much it has increased what it charges PC companies to assemble their PCs but analysts estimate it to be a roughly 10 per cent hike, or an extra US$2-$3 per notebook computer assembled, on top of the US$20-$25 original cost.
Analysts also expect other contract manufacturers, such as Taiwan’s Quanta, the world’s biggest PC assembler, and Hon Hai, best known for making Apple’s products, to follow suit, though neither company commented on the subject.