10/12/99 - Computer Vendors Expect Another Price Hike
Oct. 12 (The Miami Herald/KRTBN)--South Florida's computer market appears to have recovered from the price aftershock of the earthquake that wrecked Taiwan last month. On Monday, memory prices hit their lowest level since the Sept. 21 disaster.
But local vendors and customers, who were flabbergasted at overnight 40 percent price hikes that followed the 7.6 magnitude temblor, warn that another price shakedown could be coming. And unlike the Taiwan hike, which was fueled by fear that major manufacturing plants had been damaged, the next spike will be driven by increased demand, last longer and affect more people.
"The day of the earthquake, people just raised their prices categorically," said Darren Frankel, vice president of Computer and Software Wholesale of Davie. "Customers were in disbelief, and a lot of people were in denial."
But the big price increase is yet to come, he said. Like a doomsday prophet, Frankel warns that computer prices will skyrocket as this year's Christmas rush converges with purchases by Year 2000 procrastinators. As consumers replace older machines that cannot recognize the date rollover from 1999 to 2000, demand will outstrip supply. Prices will rise.
"Come Jan. 1, there is going to be so much demand that there's going to be a shortage of components or labor or both," Frankel said. "Whoever's got inventory will be able to name their own price."
Frankel's warning isn't just the ramblings of a millennium madman. It is an industry-wide belief that is backed by history.
During the past 20 years, computer buyers have grown accustomed to paying less for more. But memory chips, while adhering to the general downward trend in pricing, have fluctuated wildly.
When Microsoft launched Windows 95 and consumers rushed to upgrade their suddenly sluggish machines, memory prices spiked with increased demand. When a 1993 fire destroyed a Sumitomo plant in Niihama, Japan -- then the world's main source of epoxy resin for component packaging -- memory prices again soared. And this summer, when chip maker Micron Technology discounted memory to unload excess inventory and spur demand, 128-megabyte chips plummeted to an unprecedented low of about $97 each -- or less than a dollar per megabyte.
Since early July, memory has again been on the climb in response to the rebounding Asian economy, increased Y2K purchases, free PC programs and $400 system rebates, said Peter Wolff, an analyst at ING Barings.
"Memory chips are commodities, fixed by supply and demand," Wolff said. "What it costs to make the chips has nothing to do with what they sell for."
Days before the Sept. 21 quake, the wholesale price of the $97 chip already had climbed to about $215. As news spread of the 7.6 magnitude temblor, chip prices in existing U.S. inventories jumped into the mid-$300 range. (Taiwan's manufacturing plants produce about 10 percent of the world's memory chips and 80 percent of the world's motherboards.)
On Monday, memory prices retreated to $215, pushed down by reports that northern Taiwan's Hsinchu Science Park and Taipei had escaped major structural damage. But continued power outages and transportation delays have bumped up motherboard prices by 10 percent to 15 percent, and some models are hard to find, said George Duke, owner of Source Mart, a Davie computer shop that supplies resellers.
ATG Microsystems, a Miami distributor that supplies scores of local computer shops, was able to hold the line on memory and motherboard prices in stock. But Sales Manager Jose Cespedes is bracing for higher prices with new shipments. Those prices, in turn, filter down down to consumers.
"Our price is based on what we get it for," Cespedes said. "This business works on speculation."
That speculation paralyzed some budget-conscious consumers.
"People just aren't sure what to do," said Delores Lennox, purchasing manager at MacCenter in Fort Lauderdale.
The question facing buyers: Do I wait to see if prices drop further, or do I buy now to avoid the seasonal and Y2K-related increase that is almost certain to come?
"We in America basically are a bunch of last-minute people," said James Piguet, marketing director at ChipTech, a Pembroke Park computer assembler and parts distributor. "I believe we will see a dramatic increase in purchasing by the end of the year."
As consumers rush to the stores, prices will rise. And those who wait may be forced to pay a $100 to $300 premium on a $1,000 machine or to live with malfunctioning computers that cannot handle the date rollover from 1999 to 2000.
Window Coverings To Go in Davie put off buying 10 new computers in hopes that the inflated memory prices would drop, said operations manager Keith Elbertson, who moonlights as a computer consultant. The gamble so far has paid off, and Elbertson hopes to buy before month's end.
Delaying any longer may force the business to either pay more or postpone its network expansion four to five months.
Said Elbertson: "I say get it now, because in two months you might not be able to get one at all."
By Jack Rejtman
-0-
To see more of The Miami Herald, or to subscribe to the newspaper, go to herald.com |
