Competition set to keep PC prices low

PC buyers could benefit as the market opens up to new vendors

The PC industry will see further upheaval as vendors are still struggling to generate a profit and are facing the introduction of new and disruptive technologies such as virtualisation, according to research firm Gartner.

However, PC buyers could benefit as the market opens up to new vendors with lower labour costs or more modest profit margins.

Gartner said it expects annual PC shipments to grow by an average of eight percent between 2006 and 2009, but warned that many vendors will struggle to survive. This is because standardised products with little opportunity for vendor differentiation are forcing PC makers to compete on price.

Improvements in hardware have also outpaced the specs required by new applications, which allows business customers to buy more basic systems at lower cost, Gartner said.

For the vendors, things are only going to get worse. Technologies in the pipeline will present PC makers with investment decisions they cannot afford to get wrong, according to Gartner vice-president Brian Gammage.

"At a time when the PC industry is going through this upheaval, the development of PC virtualisation will create extra risks for the suppliers of PCs unless a broadly supported standard is established," he said. In 2006, both Intel and AMD will introduce new PC processor chips with hardware support for virtualisation schemes.
Many leading PC suppliers have operated at near-zero margins since 2001, Gartner said. Last year, the firm accurately predicted that IBM would spin off its PC division because of the increasingly tough market.