Brace yourselves: PC and tablet prices are heading up this year.
Gartner and IDC predict price hikes due to the global chip crisis that Microsoft and Apple said this week will dampen revenue growth in the current quarter. Analysts said Windows PC makers will have no choice but to pass along shortage-fueled higher component costs to corporate tech buyers.
"Certainly, we expect prices of PCs and tablets to increase in the near term," said IDC analyst Linn Huang. "Semiconductor shortages, as well as logistics that remain impacted, are shortly going to force OEMs [original equipment manufacturers] to raise prices."
Huang said he expects a "10% to 15% price increase imminently, with a risk of it climbing even higher."
The analyst firms said Apple will likely delay a price hike longer than Windows PC makers. Apple has a stronger negotiating position in the supply chain than PC manufacturers. Also, its self-designed M1 processor gives the company a wider sale margin on MacBooks and iPads, Huang said.
"I believe they'd like to wait until another [MacBook, iPad] refresh to make pricing moves, but we'll see if they can wait that long," Huang said. "The supply constraints aren't getting markedly better."
Indeed, Pat Gelsinger, CEO of chipmaker Intel, predicted that the shortage will worsen in the second half of this year, the BBC reported. He also predicted it will take a year or two for supplies to return to normal.
Microsoft CFO Amy Hood told Wall Street analysts Tuesday that "significant supply-chain constraints" affected the company's Windows OEM and Surface businesses. During the earnings call, Hood said OEM revenue fell 3% and Surface PC and tablet sales by 23%, even though demand was strong during the fiscal fourth quarter ended June 30.
OEM revenue will decline mid- to high single digits in the current quarter, Hood said, according to a transcript of the call on the financial site The Motley Fool. At the same time, the Surface business will fall by the low teens "as we continue to work through supply chain challenges."
Apple CFO Luca Maestri told analysts the component shortage would contribute to less revenue growth in the current quarter than the one ended June 26.
"The supply constraints that we've seen in the June quarter will be higher during the September quarter," Maestri said. The constraints will primarily affect the iPhone and iPad.
Apple CEO Tim Cook said the chip shortage tightened supplies of legacy silicon, not the company's latest chips.
Apple prices its Macs and iPads at the higher end of the computer market. The chip shortage has led to Windows PC makers favoring expensive products. That's because premier components are easier to find than low-priced ones, said Gartner analyst Mikako Kitagawa.
"Product mix is weighted toward the high-priced products," she said. "Vendors are prioritizing the high-priced products."
The COVID-19 pandemic contributed to the global crisis by triggering soaring demand for electronics from people forced to work and play at home. Other factors included the China-U.S. trade war that forced American businesses to buy products from non-Chinese manufacturers already at maximum capacity.
The shortage affects scores of industries, not just computer makers. Auto manufacturers are an example of another hard-hit sector. Consulting firm AlixPartners expects the auto industry to lose $110 billion in sales this year, The Washington Post reported.