Notebook prices fall, but manufacturing costs remain high

By Sarah Falson

COOLUM, Qld: Notebooks will make up the bulk of computer-purchases in 2007, with analyst IDC naming the category one of the fastest-growing consumer electronics segments of the year, at this week’s Kickstart forum at the Hyatt Regency in Coolum.

Though 41.6 per cent of households already owned a notebook at the end of 2006, according to research conducted by IDC, the category has huge growth potential compared with the PC market which is already penetrating 96.6 per cent of Australian homes.

“We expect notebooks to be the major form factor in households eventually, but the category still has a lot of growing to do,” said IDC analyst, Liam Gunson.

“In Q4 last year, notebooks accounted for 60 per cent of computer purchases in Australia.”

However, notebook manufacturers who make smaller quantities of product – such as LG and Samsung, the former of which recently pulled its notebooks out of retailers and the latter of which pulled out of manufacturing notebooks all together – can’t capatalise on this growth because prices are continuing to decline at retail level while component costs remain the same.

“The economy is strong and there’s a significant decline in prices, offering more opportunities for manufacturers, but the componentry hasn’t slowed either which means it will be difficult for manufacturers,” said Gunson.

Growth of the PC market will continue to slow, according to Gunson, with only a 3.5 per cent growth for the category in 2006 compared with growth in the “high teens” in 2005 and 2004.

“PC sales were growing at a rate of almost 20 per cent in 2004, but we think this was due to the refresh cycle of Y2K, when more people than usual were upgrading their home PCs.”

IDC expects that Microsoft’s Vista platform will drive PC sales in 2007, but not enough to put the year on par with 2005 and 2006. According to the analyst company, Vista, along with the next generation DVD war and the games console war will be the most controversial consumer electronics products this year, the marketing of which will dominate retail space.