Welcome to AsiaBizTech Web Site


 
Top Page
Site Map
News at a Glance NEA
 • News Center
 • Internet
 • PC
 • This Week
 • Communications
 • Computer
 • Business
 • Electronics
 • Japan
 • Taiwan
 • Korea
 • China


Advanced Search


(Nikkei BP Group)



(No.1 High-Tech News Site in Japanese)



















  • Personal Computer Pricing Battle Intensifies in Japan
  • January 25, 1999 (TOKYO) — Japanese customers are benefiting from the widespread price cutting of personal computers, but PCs are still substantially more expensive in Japan as compared to the United States.
    The price cutting was originally triggered by Compaq Computer K.K. of Japan and IBM Japan Ltd.

    An increasing number of low-priced PCs have become available in the Japanese market. As is the case in the United States, where PCs priced at US$1,000 or less have gained a firm foothold, the Japanese market is seeing more releases of less-expensive models.

    “In the United States, PCs priced at US$1,000 or less are becoming a new trend, and the Japanese market is also expected to follow the move,” said Katsuichi Tomita, vice president and executive general manager of NEC Corp.’s First Personal C & C Operations Unit.

    According GfK Japan Ltd., sales of PCs with a retail price of 200,000 yen (US$1,760) or less have been growing since the second half of 1997. The percentage of sales of such PCs surpassed 54.4 percent in September 1998. Since then the figure has remained around 50 percent.

    In the coming spring sales campaign, sales of PCs priced in the range between 100,000 yen (US$880) and 200,000 yen will likely exceed 60 percent of the market, industry observers said.

    Following the Trend in the U.S. Market

    The PC price war in Japan was triggered by Compaq. The Japanese subsidiary of the U.S. personal computer maker released the PRESARIO 2210 for a retail price of 138,000 yen (US$1,215) in the fall of 1997.

    NEC and Fujitsu Ltd., the top two Japanese PC makers, released all-in-one PCs preinstalled with business application software for around 190,000 yen (US$1,670) in February 1998.

    During the 1998 year-end sales campaign, IBM Japan captivated the market with the Aptiva D1J, which it released in November. The all-in-one model, including a monitor as well as word processing and spreadsheet software, was priced at around 148,000 yen (US$1,300), or the first such price below 150,000 yen in Japan. With the release of the Aptiva D1J, Japan’s recent PC price competition entered a second phase.

    Other major PC makers could act to bring down PC prices by joining the price war with products priced less than 150,000 yen, the industry analysts said.

    However, unlike the case in the United States, where US$599 PCs are sold, many of them think that models priced at US$1,000 or less are unlikely to be introduced in Japan by the end of the year.

    In Japan, PCs are usually sold in a package (or all-in-one models, which come with a monitor, business application software and other features). Japanese consumers tend to prefer reliability and high-performance consumer goods. Japanese consumers are less interested in the do-it-yourself approach or even buying a monitor separately.

    The price range between 120,000 yen and 130,000 yen (US$1,060-US$1,145) is a break-even point for PCs, if they are sold together with a monitor and application software, said Yasuyuki Higuchi, director of Compaq Japan’s Consumer Presario Product Marketing Division.

    However, PC prices can decline owing to a fall in prices of parts as well as cost-cutting efforts made by PC makers and retailers. The following is an analysis of trends in PC pricing.

    OEM to be a Key for Cutting Production Costs

    Of the costs for PCs sold in Japan, parts, manufacturing costs and sales management costs each account for 30 percent-40 percent. The profit margins for manufacturers and retailers as well as costs for bundled software represent only some 5 percent-10 percent.

    Desktop PC models priced at less than 200,000 yen were made available thanks to falling prices of central processing units, memories and hard disk drives. The collapse of the market domination of Intel Corp. and growing market share of compatible CPUs made by Advanced Micro Devices Inc. and other companies since last year have contributed to the recent price-cutting move.

    Takahiko Umeyama, research vice president at IDC Japan Ltd., said that prices of PC parts won’t decline much. For this reason, it will not be easy for PC makers to cut prices of all-in-one desktop models.

    However, prices of notebook PCs can still be slashed. A Celeron series lower-priced CPU designed for notebook PCs will be introduced by Intel. And prices of 12.1-in. or larger thin-film transistor-liquid crystal display (TFT-LCD) panels also are expected to drop over the long term. Thus, many A4-sized all-in-one PC models priced below 200,000 yen could be introduced.

    Some makers are trying to cut their manufacturing costs by procuring finished and semi-finished products made on an OEM basis from Taiwan and other Asian countries. However, Japanese PC makers had been reluctant to use products made in Asia due to fears that customers might think that such products are inferior in quality.

    Yet today most multinational PC makers buy products from Taiwan-based PC producers. An increasing number of domestic makers have their Taiwan partners manufacture notebook PCs on an OEM basis. For example, NEC procured its A4-size notebook models from First International Computer Inc. of Taiwan for the year-end sales campaign.

    Some Japanese manufacturers are showing an interest in Korean makers due to the weaker won in the wake of the economic crisis and lower manufacturing costs.

    Distribution Costs Reduced

    In an attempt to cut sales management costs in distribution, sales and support of products, PC makers also are trying to reduce inventories.

    Sales management costs comprise about 30 percent of prices of PCs. Excessive inventories are thus a significant burden on such makers. In Japan, makers provide retailers with some funds to reduce prices of their products as sales promotion expenses.

    Sony Corp., which started its PC business in 1997, simply estimates demand for the entire market and then distributes products to retailers accordingly. In this way, Sony was able to evade a sudden fall in prices of its products because it holds little inventory. However, the company got a poor reception from retailers and consumers after its popular models became unavailable. Yet Sony could set competitive retail prices for its products.

    Other companies that had suffered from accumulated inventories also adopted Sony’s method and reduced their shipments. By the summer sales campaign of 1998, such firms disposed of nearly all of their excess inventories. And the successes in inventory reduction efforts enabled them to slash PC prices.

    IBM Japan and Apple Japan Inc. trimmed their distribution costs. IBM Japan skipped sales agents and started direct transactions with major retailers with volume sales.

    Apple Japan implemented a drastic reduction in distribution costs by constructing a new distribution system to sell iMac PCs for 178,000 yen (US$1,570). Under the system, the company transports its products by air from a plant in Singapore to Tokyo’s Narita Airport and then directly to retailers.

    A key to further price reductions will be the direct sales system. Major direct sales vendors such as Dell Computer Corp. of Japan and Gateway 2000 Japan Inc. have not sold models priced at less than 100,000 yen because they prefer to sell PCs with the “latest specifications.”

    Some direct sales vendors have introduced lower-priced PCs. Epson Direct Corp., for example, sells a model priced at 99,800 yen (US$880).

    The first PC priced around US$399 (as in the United States) is likely to be released by one of these direct sales vendors, the industry analysts said.

    Related stories:
    ¥ Intel KK Looks to Serve Growing LCD PC Market, Pres. Says
    ¥ Japan’s PC Sales in Second Week of Dec. Expand Sharply
    ¥ IBM Japan to Boost Sales of Low-Priced Desktop PCs for Homes
    ¥ Only Retailers with Skillful Sales Staff to Sell iMac: Apple Japan’s Director

    (Yasushi Uchida, Masahiro Komukai and Kentaro Kozuchi, Staff Editors, Nikkei Personal Computing)



    News Center for more Asian news.>



    Copyright (c) 1996-2000 Nikkei Business Publications, Inc. All Rights Reserved.
    Privacy policy