PC Prices May Rise Next Year as COVID-19 Vaccines Make Cargo Space Limited

Demand for electronics boomed this year as the world dealt with stay-at-home orders and lockdowns. But while this is good news for PC makers, it has also led to logistical challenges, especially with many PC components being in short supply. 

In the coming months things might get worse as PC makers will have to compete for cargo space with COVID-19 vaccines, as detailed this week by The Register. In the end, PCs may get more expensive than they are today.

Component Shortages & Complicated Logistics

The COVID-19 pandemic had a disruptive effect on all major supply chains. Normally, PC makers, as well as suppliers of various PC components, use air freight for their premium and latest products only. Due to numerous interruptions in the supply chain, the mix of air shipments rose in the recent months, increasing costs. To make matters worse, there are shortages of PC components, including CPUs, display panels and graphics cards.

Among the particularly important components that are in short supply today are LCD panels. These commodity products consist of ingredients — liquid crystal array, backlighting, T-Con boards, drivers, inverters and more  — made at different locations. If one of the elements is missing, the panel cannot be assembled and used for a PC or a monitor.  

"The industry is encountering [shortages of] LCDs," Jeff Clarke, chief operating officer of Dell, said during a November 24 earnings call with analysts and investors. "That's the kind of component-driven cost environment. There are a couple of sub-categories that are, I think, important for you to think about. One would be LCDs and then particularly the components that go into the LCDs, most notably T-Cons and drivers, ICs. Those are in short supply, driving up the cost of LCDs."  

HP recently complained about overall shortages of CPUs, LCDs, and various semiconductors. The company expects supply constraints to persist through the first half of next year. 

"We exited the quarter with an elevated backlog and continue to operate with component supply shortages, which are expected to constrain our growth through the first half of 2021," Enrique Lores, CEO of HP, said during a November 24 earnings  call, according to a SeekingAlpha transcript. 

"Our top line remained constrained, due to industry-wide supply shortages in CPUs and panels." 

In general, demand greatly exceeds supply and will continue to exceed it for a while, according to HP. 

"Heading into Q1, … we expect macroeconomic conditions to be more uncertain as the impact of the COVID-19 pandemic continues to evolve," Lores said. 

"Our backlog remains elevated and higher than in the previous quarter, but we expect industry-wide CPU, panel and semiconductor constraints to continue to negatively impact our ability to meet demand, especially for notebooks, which will constrain top line growth."

PC Prices May Rise in the New Year 

In the coming months pharmaceutical companies and governments are expected to start shipping COVID-19 vaccines, using, at least initially, use a lot of air freights. As a result, already elevated air freight costs are likely to increase again. 

"Likely, there are going to be challenges in the freight network towards the very end of the year as airplanes get filled up with vaccines and we are all competing for a limited amount of space," Clarke said

Normally, around 20% of notebooks are brought to Europe by air freight, Canalys CEO and president Steve Brazier told The Register. Today, that number has increased to about 30%. 

Due to high demand, component shortages, and increasing air freight costs, PCs may get more expensive in 2021. 

"The cost of air freight has been rising all year because, quite obviously, there have been very few planes in the sky," Brazier told The Register. "The arrival of the vaccine will mean that there is yet more competition for the very little air freight capacity that currently exists in the world. … In the old days, only fools bought new PCs for Christmas because they were always so much cheaper in January. That will not be the case this year, when prices could well rise in the New Year."