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Small PC makers hiking PC prices on hard-drive shortage

Small PC makers are raising PC prices by up to 20 percent

By Agam Shah
November 22, 2011 12:25 PM ET

IDG News Service - The early brunt of a hard-drive shortage resulting from widespread flooding in Thailand is falling on small PC makers, who are raising computer prices to stem losses.

Hard-drive prices have skyrocketed since October, and shortages have forced independent computer makers to raise PC prices by up to 20 percent. Analysts expect PC prices to continue rising as the severity of the floods are assessed, with prices expected to stabilize as shortages end by the first half next year.

Thailand accounts for up to 45 percent of worldwide hard-drive production and floods have disrupted production and supply chain operations of key hard-drive makers Western Digital, Seagate and Toshiba. With fewer hard drives rolling out of Thailand and increased prices, research firms have lowered worldwide PC shipment expectations for the fourth quarter this year and next year's first quarter.

The world's largest PC makers like Hewlett-Packard and Dell are feeling a lesser impact as they retain months of hard-drive supplies, analysts said. Even in the shortage, embattled hard-drive makers are shipping a bigger chunk of units to large PC makers to meet contract commitments, which in turn is hurting smaller PC makers buying from distributors or the open market.

Spot prices of hard drives are going up, and small PC makers are feeling a big impact as large PC makers wield larger control over hard-drive supplies, said Bob O'Donnell, program vice president at IDC.

"They are highest on the priority list to get the products," O'Donnell said.

The prices of 500GB to 2TB hard drives are up by US$50 to $125 compared to September, said Matt Bullock, chief technology officer Nova Mesa Computer Systems. Ongoing memory price drops have offset hard-drive price rises, but the company has raised PC prices by an average of 5 percent to 9 percent.

"We're looking easily at $75 more per computer," Bullock said.

The price rise came so quickly that Nova Mesa had to update original quotes sent months ahead to some customers. The company is now issuing quotes good only for seven days.

Some Nova Mesa customers have deferred orders until prices normalize, while some have bought machines out of immediate need. The company -- which mostly handles business customers -- hasn't seen full cancellations. Bullock said customers are being actively updated on the hard-drive situation and when it is expected to normalize.

The cost of hard drives has risen by double-digit percentages, and by triple digits in the case of higher capacity drives, said David Milman, CEO of Rescuecom, a computer firm building custom PCs and offering repair services.

But the impact of rising hard-drive prices is more on low-end and barebones PCs, while high-end PCs are bundled with services, which pads the extra cost. Prices on Rescuecom's lower-end PCs have gone up by as much as 15 percent to 20 percent, and higher end systems by three to five percent, Milman said.

Reprinted with permission from Story copyright 2014 International Data Group. All rights reserved.
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