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Retailers to hike PC price tags
Apple, NEC already announce increases as their costs rise; others expected to follow suit.
March 25, 2002: 1:22 PM EST

NEW YORK (CNN/Money) - After free-falling for more than a year, prices for personal computer systems appear to be on the rise amid soaring component costs and a resurgence in demand.

Japanese electronics company NEC Corp. Monday said it plans to raise the suggested retail prices for its PC systems, citing rising costs of key components such as memory and the increasingly popular flat-panel screens.

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NEC's price shift came on the heels of a similar announcement from Cupertino, Calif.-based Apple Computer (AAPL: Research, Estimates), which last week hiked the price of its iMac computers by $100. The company blamed a 25-percent increase in flat-panel display costs, and said its memory-chip costs had tripled in the past three months.

A report in Japan's Nihon Keizai Shimbun newspaper also reported Sunday that Fujitsu Ltd. and IBM Japan Ltd. also plan to raise their PC prices by 10-to-20 percent starting in April.

And it's likely that others will follow suit.

"It's interesting that we're now seeing price increases from across the pond because it implies that Apple led this charge on the upward side, and the other vendors are anxiously crowding in behind them," said Roger Kay, an analyst at high-tech research firm International Data Corp.

The current situation can be traced back to the fall of 2000, when there was an abrupt demand in PC systems, Kay said. That prompted PC manufacturers and their component suppliers to scale back their manufacturing in an effort to bring supply back into balance with demand.

During most of that period, flat-panel displays -- which increasingly have been included as part of a home PC package -- became more popular, but they still hadn't reached the volume point where they could take up the slack, Kay said.

But beginning in the fourth quarter of 2001, demand for flat-panels began exceeding supply, a situation Kay said he expects to linger for quite some time.

"It's led to the beginnings of a crunch that's only getting worse," he said. "Demand is getting higher, and supply is getting constrained."

The cost of computer memory also has soared recently. Last week, Micron Technology, a leading supplier of memory chips, said the average price for its dynamic random access memory, or DRAM, chips in the quarter ended Feb. 28 had risen 70 percent over the prior quarter.

In the coming months, there are likely to be fewer bargains to be had as PC vendors shift the costs to consumers, offering systems with less memory and bumping up the prices for packages that include a flat-panel display.

And the looming shortage of flat-panel displays is likely to have more of a lasting impact on prices, according to Kay.

"I would expect to see the memory problem clear out in a couple of quarters at most, but it looks like the panel issue is going to last," Kay said.  Top of page

-- Reuters contributed to this report