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Inflation hits PC market as laptop and desktop prices jump, and most businesses are last in the line for kit

Constrained supply of parts like USB-C among reasons for price hikes

Inflation is hitting the PC market, with prices jumping amid chip shortages and market uncertainty.

Average selling prices of PCs are up by 10 per cent compared to a year ago, Gartner analyst Mikako Kitagawa told The Register.

"We recognize that enterprise grade laptops are the most impacted as these do not have flexibility on the configuration," Kitagawa said.

PC makers have a limited supply of components, from which they are able to squeeze more profit when they put them in higher-priced premium PCs, the analyst said. That has reduced the supply of low-cost PCs such as Chromebooks in the market.

PC makers are keeping the same price on low-end models by sacrificing features, like less memory or storage, or using low priced components, she explained.

"We don't know exactly when the shortage ends, but we anticipate that this will at least continue until mid 2022," Kitagawa said.

The average notebook price this is year is about $820 compared to about $790 last year, said Ryan Reith, program vice president at IDC.

There will be a short term price bump that may carry through first half next year as demand for PCs exceeds supply, Reith told The Register. Users will likely be able to buy high-end PCs that match their spec off the shelf, but that would be harder on entry-level laptops.

"The Chromebooks are less popular, there's more higher end Windows PCs being put into market," Reith said, adding "the big question is how long is this sustainable."

PC makers will ultimately have to adjust pricing to the fact PC upgrades will happen quicker as more users work from home, and not all upgrades will be to high-priced PCs, Reith said.

IDC projects that PC shipments will grow in the range of 13 per cent to 14 per cent this year compared to 2020, but will have a low-single-digit growth rate for 2022.

For the want of a nail

There are no shortages in CPUs from Intel and AMD, as was the case pre-pandemic. Instead, there is a shortage of very low-cost components, such as display driver integrated circuits that cost between $1 to $4, power management circuits, and USB-C parts.

"They are no less critical to the system," Reith said.

The increase in the demand for chips in areas that include optoelectronics, sensors and discrete chips has also caused supply chain constraints, IC Insights said in research released this week.

The lead time for these products is close to four or five months, a sharp increase from the six to eight weeks under regular conditions, IC Insights said.

Prices for Intel's client PC chips were up by 9 per cent year-over year and 16 per cent sequentially, the company said on its earning call last week. Chipzilla sold more desktop chips and high-end laptop chips over the last quarter.

"PC demand remains very strong, and we believe the 2021 TAM [total addressable market] will grow [by] double digits even as ecosystem shortages constrain our customers' ability to ship finished systems," Intel CEO Pat Gelsinger said on an earnings call last week.

AMD's CPU and GPU average selling prices were higher compared to the previous quarter and year, Intel's rival confirmed during an earnings call on Tuesday.

A richer mix of the company's Ryzen CPUs and high-end Radeon graphics product sales prompted revenue for the Computing and Graphics segment to shoot up to $2.4bn, a 44 per cent increase year over year.

Memory and storage chip maker Micron said on September 28 that the average selling prices during its fiscal third quarter for DRAM increased in the "high single-digit percent range" compared to the second quarter. ®

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