Rumbles In The Orient Could Result In Higher Computer Prices

Rumbles In The Orient Could Result In Higher Computer Prices

After several decades of exploiting cheap workers and low costs in China, a number of companies may have to move their facilities elsewhere. Chinese workers have begun demanding better compensation and safer working conditions (we saw how Foxconn dealt with the iPhone issues last month). Meanwhile, the yaun is finally appreciating after years of being deliberately undervalued. This puts further pressure on businesses already struggling with low profit margins. The chinese government has also entered the picture--it wants workers trained in high technology, not assembly lines or cardboard box production.

China is going to go through a very dramatic period. The big companies are starting to exit. We all see the writing on the wall," said Rick Goodwin, a China trade veteran of 22 years, whose company links foreign buyers with Chinese suppliers. "I have 15 major clients. My job is to give the best advice I can give. I tell it like it is. I tell them, put your helmet on, it's going to get ugly," said Goodwin, who says dissatisfied workers and hard-to-predict exchange rates are his top worries.

In a February 2010 survey, Alix Partners estimated that China was generally more expensive than Mexico, India, Vietnam, Russia, and Romania.We doubt we'll see a flood of companies packing up to do business in Vietnam, but the others are of potential interest. Some companies are also evaluating whether or not they should move production facilities inland, where development has been much slower and labor prices correspondingly cheaper. To date, almost all of China's development has focused on sea ports, to avoid the cost of transporting goods over land before shipping them.


One of Intel's Chinese production facilities, located in Sichuan Province

Even some native companies, like Foxconn, are choosing to relocate. The company recently announced its plans to move much of its manufacturing capacity to the city of Chongqing, where labor costs are 25-40 percent lower than in the coastal cities. Even if large corporations moved en masse to either leave China altogether or head inland, we doubt the US would see much of a difference in terms of job openings. With multiple other nations offering reduced production costs, there's still not much incentive to move production facilities here.

How this will affect the computer industry is hard to say. Longer term, it could improve the quality of the second-tier motherboards coming out of China, since local manufacturers are less likely to leave (Foxconn notwithstanding), but workers' demands for better conditions and higher pay could put some OEMs out of business. As for the demands themselves, they indicate that China is entering a new phase of industrialization, similar to what happened in America and Britain the mid-to-late 19th century. The danger here is that China (and India, in the not-so-distant future) have both grown substantially thanks to foreign investment. If those investment dollars begin flowing into other, cheaper, nations, it could take the economic wind right out of either country's sales.
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Good for china. If I have to pay a little extra I don't mind. Those people over there were being taken advantage of and had horrible working conditions. No one in the US would stand for that treatment. So why should we subject them to it?

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Well, seeing that there really isn't any way to see the future, we will have to wait it out and see how this advances. Maybe the prices will be higher or MAYBE it lowers O.o lol. How much more does it cost to ship products on land first?

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Acarzt,

It's the way industrialization works, honestly. I majored in poli sci with a minor in econ once upon a time, and while there's a huge debate over the dubious merits of industrialization's progress--but no one has ever come up with a model that offered a real-world solution.

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That's unfortunate... I guess it's just an other form of "Working your way to the top"

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I would gladly pay much more for more reliable products (because even today, Made in China often means crap), but if it's just the same workers getting paid more because of suicide threats, I don't know if that will change much. I mean, it's not as if they raised their wages by so much that they are instantly motivated to do a better job: how can you possibly feel good about welding the same set of transistors to every PCB that comes your way, and repeating it hundreds if not thousands of times a day, then going home for four hours of sleep and doing it all over again?

Read some reviews on Newegg (especially mobo reviews) and you'll see how many people complain about DOA parts. I certainly wouldn't want to be working in those conditions, but maybe that's the answer: let there be a few model lines at different companies exclusively built by highly-trained, highly-motivated, highly-paid employees where it becomes an art form and not a glorified assembly line. THAT would be a premium worth paying, because these predicted price raises don't look like they'll be accompanied by higher quality.

A few examples: look at LEGO. They used to be exclusively made in countries like Denmark, Switzerland, and Canada. Now, the price/piece ratio has gone up, and all the same, some sets and parts are (you guessed it) made in China. Someone point out the logic in that. Or, if you live in NYC, think of the MTA raising fare prices at an alarming rate while still laying off employees, cancelling subway lines, etc. My point in all this is: sure, it's good to see the computer companies paying more competitive wages, but if you're paying more for the same thing I agree with Mr. Goodwin in saying that's really worrying.

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They raise prices because they know people will pay it.

It's never going to end... Back in the days of the original Playstation, games were $40 a pop... Now they are $60 a pop and I've heard a few rumors they are going to go up to $70 in the next gen.

PC gaming is looking more and more appealing.

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This is slightly off-topic, but about the only thing appealing about PC gaming is the lower price, and the fact that there are still some publishers that aren't assholes. Think about Ubisoft's new DRM scheme: if there was ever something that would drive people to consoles, that would be it. Even Crysis 2 is being developed for consoles first, and then ported to PC. They say they're being developed simultaneously: yeah, right. It's easier to port to PC than vice-versa, and consoles have a built-in anti-piracy feature (you either have the game disc or you don't), and consoles reach a wider market, so most developers (maybe id software, Blizzard, BioWare, and a few others excluded) don't really "feel" like making good PC games anymore.

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Nethersprite:

This is slightly off-topic, but about the only thing appealing about PC gaming is the lower price, and the fact that there are still some publishers that aren't assholes. Think about Ubisoft's new DRM scheme: if there was ever something that would drive people to consoles, that would be it. Even Crysis 2 is being developed for consoles first, and then ported to PC. They say they're being developed simultaneously: yeah, right. It's easier to port to PC than vice-versa, and consoles have a built-in anti-piracy feature (you either have the game disc or you don't), and consoles reach a wider market, so most developers (maybe id software, Blizzard, BioWare, and a few others excluded) don't really "feel" like making good PC games anymore.

 I choose PC gaming because I prefer to use a keyboard and mouse, and I still have the option to use a controller. I can crank the graphics up much higher than a console game, I've been able to play online long before any console was able to. And now, the games are cheaper.

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"Read some reviews on Newegg (especially mobo reviews) and you'll see how many people complain about DOA parts."

Haha!  I wish I could find the post from someone who marked their tech level as high and stated that their video card was super fast because it had 500GB of hard drive memory.

Newegg should NEVER be taken seriously for hardware reviews.

Anyway, back on topic - I'm all for paying a few bucks extra if it means it was made in a socially responsible manner and not on the backs of employees who are being paid sub-standard wages simply because of where they live.  Someone needs to do a documentary/expose on the maunfacturing processes of the computer industry similar to how Walmart had their manufacturing facilities exposed.  Maybe if more people know where their parts come from they will put some pressure on the manufacturers because you can be sure that even though they may be switching locations they will always try to get the absolute most by putting out the absolute least.

Hardware isn't all pixie dust and pocket protectors.

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Acarzt,

You refer to game prices "in the days of the original Playstation." Let's say that's 1998. Based on measured inflation rates from 1998-2009, a game that cost $40 then now costs $52.40.

Some of the remaining $7.60 goes to transportation costs of the physical discs, and fuel is much more expensive now. The rest can probably be explained by the increased costs of game development.

So yes, games do cost more now, and studios might be pocketing a bit more profit than they used to be--but we're talking about $2, not $20.

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Joel H:

Acarzt,

You refer to game prices "in the days of the original Playstation." Let's say that's 1998. Based on measured inflation rates from 1998-2009, a game that cost $40 then now costs $52.40.

Some of the remaining $7.60 goes to transportation costs of the physical discs, and fuel is much more expensive now. The rest can probably be explained by the increased costs of game development.

So yes, games do cost more now, and studios might be pocketing a bit more profit than they used to be--but we're talking about $2, not $20.

PC games have been $50 for as long as I can remember. They might have been a little cheaper before. But they definitely haven't gone up in price like console games.

The problem with console games is there are SO many licensing fees. Everyone wants a peice and us gamers are paying for it.

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@Nethersprite, acarzt:

Both rolled into one response because you've touched on a similar topic. I had (it's been donated to my breeder friends' children) a huge stock of Lego blocks as a callow youth, most of which I bought myself with a modest allowance-- at second-hand stores, flea markets, and yard sales. I also have a top-notch collection of Playstation 2 and Xbox 1 games (and NES, Genesis, the various Gamesboy, Dreamcast, Saturn, Lynx, Microvision, and probably a few that are yet rotting in my basement) for which I largely spent pennies on the dollar... because they were purchased used.

If you can avoid the hype and peer pressure, you can get some very good games for very little money. Sure, you'll be playing GTA2 when everyone else is talking about doing the same things with different scenery in GTA3 or 4; but if your ego can stand the ignominy, I recommend it.

PC games are the same way, though there's less of a secondary market for the reasons Nethersprite mentioned. I'll only buy a used PC game from a friend, and I have to ensure that the data have been erased from their computer before installing it on mine. But there's not too much of a need to do that; with those "game of the year" titles, you can get last year's must-have games for a pittance. I just got (for $20) BioShock 1 bundled for some reason with Elder Scrolls: Oblivion, and the former was a great game-- so great that I ignored user reviews and spent $20 on the disappointing and annoying BioShock 2.

If I'm ever tempted by BioShock 3, I'm going to pirate it and send a ten dollar check to 2K Games. The cracked versions are much more user-friendly.

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ClemSnide:

@Nethersprite, acarzt:

Both rolled into one response because you've touched on a similar topic. I had (it's been donated to my breeder friends' children) a huge stock of Lego blocks as a callow youth, most of which I bought myself with a modest allowance-- at second-hand stores, flea markets, and yard sales. I also have a top-notch collection of Playstation 2 and Xbox 1 games (and NES, Genesis, the various Gamesboy, Dreamcast, Saturn, Lynx, Microvision, and probably a few that are yet rotting in my basement) for which I largely spent pennies on the dollar... because they were purchased used.

If you can avoid the hype and peer pressure, you can get some very good games for very little money. Sure, you'll be playing GTA2 when everyone else is talking about doing the same things with different scenery in GTA3 or 4; but if your ego can stand the ignominy, I recommend it.

PC games are the same way, though there's less of a secondary market for the reasons Nethersprite mentioned. I'll only buy a used PC game from a friend, and I have to ensure that the data have been erased from their computer before installing it on mine. But there's not too much of a need to do that; with those "game of the year" titles, you can get last year's must-have games for a pittance. I just got (for $20) BioShock 1 bundled for some reason with Elder Scrolls: Oblivion, and the former was a great game-- so great that I ignored user reviews and spent $20 on the disappointing and annoying BioShock 2.

If I'm ever tempted by BioShock 3, I'm going to pirate it and send a ten dollar check to 2K Games. The cracked versions are much more user-friendly.

I do that sometime clem. Like recently I got 6 games off of steam for a total of $60. So about $10 a pop. :-)

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