rude. he adequately explained the growth market as a whole, including all internet stocks.
The parts that go into computers has an index. The index has stayed relatively flat for five years, rising slightly each year. If the index has risen, yet Dell's component prices have fallen by 50%, then other things are at work, such as technological innovation - more parts produced per man hour, etc.
What the "inflation index" leaves out is productivity inreases. A loaf of bread may cost 30% (say, $1.30) more than it did ten years ago( $1.00). But, for that same loaf, the factory is able to generate 70% more loafs (production has gone from 1000 loafs per man to 1700 loafs per man) per month. (Assume wages have also increased 30% along with technological innovation costs to produce the loaf.) So, a factory in 1990 could produce 1000 loafs for $1000. They can now produce 1700 loafs for $1300. The actual production cost per loaf is $.76.
Although a simple example, it is true when applied to computer systems per increased man hour and output per motherboard.
So, although ASPs have been falling, production costs per system on a chip have also fallen. Demand for PCs are also increasing as is the demand that PCs perform more functions than they do today.
People want PCs to obey voice commands, vacuum their floors, do their hair - this all comes through innovation and increased demand per technological unit.
If the PC were a static unit (without much intelligence), such as the TV, and failed to change over time, then a falling ASP without effective change is worrisome. This clearly has never been the case - not for the PC. |
