The Rise and Stabilization of Taiwan PC Prices Through Component Adjustments and ASUS High Value Product Strategy
The steep increase in PC prices in Taiwan is reportedly leveling off. A market report by Taiwanese website UDN quoted system business general manager at ASUS, Liao Yixiang, as saying that retail prices of some models had gone up nearly 30% from the fourth quarter of the previous year through the first five months of the current year. Pricing is forecast to go up in the third quarter again; however, the growth rate will slow down to single digit percentage.
The congestion leading to the big hikes in the prices for the first half of the year was mostly due to tight supplies and cost hike of major hardware parts, namely computer memory, CPU and solid state drives. ASUS had also changed its retail prices in Taiwan for the 1st and 2nd quarter to reflect the increase of manufacturing costs. Yet the cost of hardware parts are now starting to come down again and allowing manufacturers to eliminate the need for aggressive retail prices hike with double digit rate. According to Liao Yixiang, this kind of move is no longer possible in the near future.
It is said that the change in pricing will bring an impact to the major hardware industry as a whole. As ASUS concerns the largest share of the consumer and commercial PC market in Taiwan, it is forecasted that other PC brands will adopt a similar trend and ease up for the rest of the year. This regional forecast has only been defined for Taiwan as the global pricing trend for other areas remains undetermined.
How the anticipated increase in hardware prices during the first half of the year resulted in a rush by consumers to buy systems early, thereby keeping growth rates single digit year on year, in terms of end sales and device activations in the first five months of 2006. However, with so many consumers having already made their upgrades, OEMs are now viewing the sales outlook for the second half of 2006 with a degree of caution.
Worldwide market research firms forecast the total number of PC shipments fell by 10% 15% due to premium parts becoming very expensive. However despite falling sales, revenue is expected to be flat or slightly up as a result of PC value increasing. ASUS co CEO Xu Xianyue claimed the company's PC revenue for the first quarter was up 25% compared to the previous year as a lot more users bought high specs machines.
Financial growth at ASUS is largely propelled by premium and niche products. High value products, which include gaming computers, commercial systems and specialized Copilot plus PCs, are already close to 60% of the overall product mix for ASUS. The company has high growth expectations on overall shipment volume compared to last year, and expects constant growth of total revenue coming from high value products. To further support the interests of local customers, the company is preparing to unveil a new value added project introduction called ASUS Service Plus for the domestic market.
