Computer Industry Competition Causing Supply Chain Woes

April 20, 2007
U.S. computer industry is saturated says economist.

Competition between computer manufacturers has been favorable for consumers but has had an adverse effect on companies down the supply chain, according to industry analysis from Euler Hermes ACI.

"The battle between computer manufacturers to provide more efficient and less expensive systems has been a beneficial trend for consumers, but a hurtful development for the companies that are providing the materials to manufacture the machines," said Patrick Lane of Euler Hermes ACI, a global accounts receivable services provider. "The result of the fight for market share has brought steep discounts by computer manufacturers, which in turn has resulted in much lower margins and profitability."

The U.S. computer industry is seen as "saturated," Lane said. "With the emergence of cell phones and with increased computing and Internet capabilities, there has been a notable slowdown in the sales of personal computers to consumers."

However, he said two industry trends will help computer manufacturers experience continued growth in 2007: the shift in preference to notebooks and laptops, and the arrival of new computers on the market designed to carry the new Microsoft Vista operating system.

The price war to attract consumers will most likely continue -- and possibly worsen conditions for suppliers -- as the U.S. economy continues to experience a slowdown. North said that businesses that rely on consumer spending may see tougher times ahead as housing market equity, which has fueled consumer spending in the past, continues to fall.

"As of January, asset value equivalent to 15% of GDP has disappeared from the housing market," he said." This fall in value will destroy some of the equity built in the past few years, drying up what has been a major source of spending for consumers."

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