News: Analysis & Commentary: COMPUTERS
PC MAKERS AREN'T COMPLAINING, BUT...
Jacques Clay doesn't want to sound greedy. After all, the general manager of Hewlett-Packard Co.'s personal-computer operation saw first-quarter PC sales jump 60%. But because of shortages of everything from memory chips to monitors, HP couldn't satisfy all the demand. "We could have been doing better," laments Clay. "The component shortage is clearly hurting us."
It's hurting his rivals, too. Almost every PC maker is crying the can't-get-what-I-want blues. Analysts say Apple Computer Inc.'s order backlog has bulged to $500 million because it can't find an adequate supply of microprocessors--or memory chips, monitors, and high-speed CD-ROM drives, for that matter. "It's every bloody thing," gripes Chief Financial Officer Joseph A. Graziano. Acer America Corp. President Ronald Chwang figures he lost some $30 million in sales, or 10% of Acer's first-quarter total, because of short supplies. No. 1 PC maker Compaq Computer Corp., sitting on a $2 billion inventory, seems generally unworried--though even it is fretting over a possible shortage of computer monitors later this year.
POWER-HUNGRY. The problem, if you can call it that: booming demand for personal computers. In January, analysts predicted that 1995 PC-unit sales growth would slow to 15% from 20% in 1994. Now, driven by consumers who want new, more powerful machines to play games such as Doom and to surf the Internet, sales could jump as much as 30%.
That should be cause for celebration--if only there were enough parts to go around. The most critical component in short supply: the ubiquitous DRAM (dynamic random-access memory) chip. At the root of the memory shortage is Intel Corp.'s relentless price-cutting on memory-hogging Pentium microprocessors, the brains of IBM-style PCs. In addition, to run well, Microsoft Corp.'s Windows 95 operating software, due out on Aug. 24, needs a hefty 8 megabytes of DRAM--and many consumers want as much as 16 megabytes.
DRAM makers can't ramp up production now because, following a glut several years ago, Japanese makers of the chips decided against building new plants. The result: "We're sold out pretty much through the rest of this year," says Shigeki Matsue, vice-president of NEC Corp.'s Semiconductor Group. NEC's rivals say they're in the same boat.
Other problems? Apple can't get enough PowerPC chips from IBM. Pentium also is boosting demand for static RAM, another memory chip. "We are in the world market trying to get as many as we can get our hands on," says Compaq Chief Executive Eckhard Pfeiffer. Actually, supplies are tight on just about everything--from capacitors to high-speed CD-ROMs. Taxed by robust TV sales in Asia, Japanese makers of cathode-ray tubes can't keep up with demand for PC monitors.
One of the few exceptions: hard-disk drives. PC makers report they're getting enough of that component, but some computer industry execs worry that the situation could change suddenly. "If PC makers turn around and say they need a couple hundred thousand extra drives, they might have a problem," says Gary S. Marks, marketing vice-president of drivemaker Conner Peripherals Inc.
All this is driving up parts prices, at least temporarily. Some PC makers even are paying cash--often more than quoted prices--for parts up to three months in advance of delivery, says Robert Gunn, sales and marketing vice-president at PC circuit-board maker Micronics Computers Inc.
NICE PRICE. Shortages don't look to ease through at least yearend--and through 1996 for DRAMs. So far, the supply problem hasn't inflated PC prices, because companies such as Packard Bell Electronics, HP, and IBM are keeping them low as they push to gain or regain share or enter new markets. "They're really fanning the flames," says analyst Dan Ness of Computer Intelligence/InfoCorp.
Eventually, though, buyers may be forced to accept less powerful models--or pay up for features they need. That could put the brakes on demand, says Bear, Stearns & Co. analyst Andrew J. Neff. Unfortunately, a cure like that is probably worse than the disease.
A Paucity of PC Parts
DYNAMIC RANDOM-ACCESS MEMORIES (DRAMs) NEC, Toshiba, Samsung, Micron Technology, and others can't keep up with demand for memory chips to run new software such as Microsoft's upcoming Windows 95
STATIC RANDOM-ACCESS MEMORIES (SRAMs) PCs based on Intel's new Pentium processor need twice as many SRAMs as the previous generation, making it hard for companies such as Motorola, Hitachi, and Cypress Semiconductor to keep pace
MONITORS The booming TV industry sucked up much of the supply produced by NEC, Sony, and others
CD-ROM DRIVES The need for high-speed drives for hot-selling multimedia games has put heavy demands on drivemakers such as Mitsumi Electric and SonyBy Robert Hof, with Kathy Rebello in San Francisco, Gary McWilliams in Houston, and Larry Holyoke in Tokyo