Price Wars Power Up Quality

In the early days of personal computers, it was depressingly common to pull a brand-new computer out of a box, set it up, turn on the switch--and see absolutely nothing happen. It's been several years since I've seen a dead-on-arrival machine. The rash of failures that used to plague PCs--from crashing hard disks to dying keyboards--have all but disappeared.

Remarkably, the improvement in hardware quality has come during an unrelenting price war that has kept manufacturers under a constant cost squeeze. In the fiscal year ended last January, for example, Dell Computer Corp.'s operating margin was a slim 7%. But far from prompting manufacturers to cut corners, the pressure is forcing them to get it right the first time and save money on returns and technical support calls. "It's a lesson the Japanese taught us," says Webb McKinney, general manager of Hewlett-Packard Co.'s home-products division. "Quality results in lower total cost."

SMALLER CHIPS. In short, the price wars have brought about more than just lower prices. Improvements in quality are likely to continue, thanks in large part to better technology. Ever smaller, more powerful chips are an example. A five-year-old network interface card I found in my office contained 39 chips. The entire system board of a new Macintosh Performa 5200 carries just 19. Fewer components means fewer points of potential failure and less chance of errors in assembly. "There's a direct correlation between simplicity and quality," says Rick Smith, director of quality for Compaq Computer Corp.'s desktop operations.

Factors as mundane as soldering technology affect cost and quality. Early circuit boards were made by inserting components through holes, and the solder joints were prone to weaken or short-circuit. Now, automated machinery solders the chips directly onto metal traces on the board, a method that is both cheaper and more reliable. Intel supplies some new Pentium chips on spools of film that can be bonded directly to circuit boards by ultra-precise assembly machines. "Our industry has moved faster than most," says Mal D. Ransom, vice-president for marketing at Packard Bell. "We've done in five years what took the auto industry 50."

Manufacturers report that returns due to defects have become rare. Acer America Corp., which sells its machines mainly through mass-market retailers, gets about 5% of them back, but inspection shows no defects in the overwhelming majority. Steve Garcia, product manager for Acer, speculates that most of the machines are returned because customers found a better deal at another retailer or they simply changed their minds. Dell, which sells directly to generally more sophisticated customers, reports only about 1% returns for all causes.

SOFTWARE SLIPS. Of course, computers have room for improvement. The biggest area for further quality improvement is disk drives. Unlike solid-state chips, mechanical devices wear with age and disk drives remain the most trouble-prone component. Another area ripe for improvement is product support and advice. Judging from the grumbling I hear from readers, it's harder than it should be to get help over the phone, and getting a broken machine fixed is worse.

Even so, the whole quality picture for computers is better than in the much more profitable software industry. It's the only business I know of where manufacturers routinely sell products they know to be defective--and customers accept "We'll fix it in the next release" as a response. Windows 95, for example, was shipped out with dozens of glitches that won't be fixed until a November "tune up." It's too bad that consumers can't expect their software to work as reliably as the hardware it runs on. Then the personal computer would be a lot closer to what many industry executives say, with some hyperbole, is their goal: A product that's as easy to use as a toaster.

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