Add-in Card Makers Will Vie for Sub-$1,000 Action: Could Threaten PC Vendors' Margins
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12/03/97
Multimedia Week
(c) 1997 Phillips Business Information, Inc.
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Chip and peripheral makers are playing into PC vendors' appetite for volume and plan to sell multimedia components targeted at sub- $1,000 systems. But trying to drive that segment of the PC business could be a double-edged sword for all vendors concerned.
C - Cube Microsystems Inc. [CUBE] and Creative Technology Ltd. [CREAF] have products in development that will bring DVD decoding and high-level audio to the low end.
While that product category continues to grow, it's coming at the expense of PC manufacturers' margins.
From September to October, the percentage of sub-$1,000 PCs sold grew from 28.2 percent to 39.1 percent of the overall desktop market, according to PC Data. The segment accounted for 26.8 percent of dollars in October compared to 18.6 percent of dollars in September. And October increases at the low end came in a month when PC sales overall were down 15.5 percent.
Stephen Baker, a senior analyst with PC Data, cautioned companies against souping up the low end when they're having a tough time selling systems priced higher than $2,000.
"It's probably not in anyone's best interest," he said, warning that volume sales may come at the expense of higher margins and wipe out the most profitable portion of the market altogether.
Based on pricing and sales trends since July, Baker said, "It's going to be unlikely that you'll see any PCs over $2,000 next year."
And if PC makers feel margins getting pinched, that will trickle down to suppliers.
Nevertheless, component makers are making a play for volume largely because big PC players including Compaq Computer Corp. [CPQ] and IBM Corp. [IBM] are heading in that direction. (see MMW, Oct. 27)
Components in Development
C - Cube is sampling a daughtercard version of its Ziva DVD decoder to OEMs now and expects to have design wins by early next year. The card is expected to sell for about $30.
C - Cube showed a versionof the card designed to work with ATI Technologies Inc.'s All-In-Wonder graphics board at Comdex earlier this month. The card also can be configured to work with graphics chips from Nvidia Corp. and 3Dlabs Inc. or attach to a motherboard, C - Cube product line manager William Chien said.
Creative is planning a bigger push toward system integrators with versions of its products priced so PC vendors can target the sub- $1,000 market.
Executives were tight-lipped about product specifics, but CEO and chairman Sim Wong Hoo's goal is to put all the functionality of the company's top-selling peripherals onto a single board. He envisions a board with most of the functionality found in the company's AWE 64 sound card and DVD upgrade kit. ( C - Cube , 408/944- 6300; Creative, 408/428-6600; PC Data, 703/435-1025.) |
