PC prices are expected to rise in the second quarter and the rest of 2021 as vendors pass on higher component and logistics costs amid high demand.
Based on the results of HP, Dell Technologies and Lenovo, inflation is likely to appear in the PC market. Cisco has already forecast a price hike for data center infrastructure. For PC market inflation, things to consider are:
- The demand for laptops has exploded for remote working and a new normal based on telecommuting is emerging. The demand for PC seems to be strong in this new context.
- There is a global shortage of chips, but other components that are also found in PCs are becoming scarce.
- PC vendors are managing their supply chains well, but executives at those companies have said they will pass on the rising costs.
Lenovo, HP and Dell Technologies all reported strong financial results and said demand is not slowing down. In addition, buyers of technology products have so far not changed their behavior due to rising prices or delays in the supply chain.
Here’s a roundup of how PC vendor executives view the supply-demand balance in 2021.
CFO Thomas Sweet has made it clear that price inflation is hitting the company. He stated :
The supply situation has not kept up with the demand environment when looking at semiconductor needs. And it’s an industry-wide problem, and clearly a problem the tech industry faces. We believe component costs are inflationary in the second quarter and likely will be in the second half. And this mainly comes from displays, DRAMs, and NANDs. We will price this inflation appropriately. And we’ll see if there’s an impact on demand. And this is really the framework in which we are going to have to work throughout the year.
Mr. Sweet added that Dell has yet to see customers adjust configurations to handle these additional costs.
HP is also seeing price inflation in printing and PCs. Marie Myers, chief financial officer of HP, said demand is strong. She said :
It’s just the demand that exceeds the supply and really creates that enabling environment. So it’s just the laws of supply and demand, which allowed us to get better prices during the quarter. Whether we’re talking year-over-year or quarter-over-quarter, this improvement in gross margin is mainly due to favorable pricing, which has resulted in reduced promotions and improvements. costs.
HP CEO Enrique Lores said hybrid work is driving demand for PCs as CIOs invest in devices to keep employees productive.
We expect PC demand to remain very strong in the coming quarters. And this strong demand is at the root of the component shortages. We have strong forecasts for both the quarter and the year. And this is based on the visibility we have today for components. If we get more components, we could do even better.
Gianfranco Lanci, chief operating officer of Lenovo, said stocks which are typically 6-8 weeks, are now low in all of Lenovo’s key regions. Mr Lanci also touched on the issue of prices. He stated :
Prices are slowly rising. And in order to maintain the profitability we need, we continue to monitor prices. We want to be competitive of course, but the prices are slowly rising. I think we will continue to increase over the next 3-4 quarters due to the component cost trend.
Mr Lanci added that demand has so far been strong enough to absorb the price increases. Mr Lanci predicts that shortages of various components are likely to continue over the next 12 to 18 months.
It remains to be seen how consumers react to price increases. There is already some trend towards desktop computers as the laptop shortage grows. At some point, demand will be affected by shortages and price increases. The big question is whether the prospect of higher prices will actually increase demand.