How do a medium-sized onion, a bottle of shower gel and an energy-saving light bulb differ from a laptop? They can all be bought at retail for less than 15p. A laptop, unless bought on contract, can’t.
The pricing of household goods might seem like a non-sequitur in a computing column. With the peculiar antilogic of modern manufacturing, however, an alien might conclude that you should reasonably be able to buy a laptop for less than a quid.
Having become used to the gravity, our green, many-tentacled friend could well note that the retail prices of my three example items are actually in reverse order relative to the complexity of their production. The onion (13p) was the most expensive in my local Tesco last Saturday, but a Neanderthal could have grown one – in fact, they grow themselves. I’m guessing you could only have started making shower gel (just 10p) around 50 years ago, had the marketing will been there. And the energy-saving compact fluorescent light bulb, the cheapest of the lot at only 8p, has become feasible only in very recent times. Imagine the development infrastructure, the materials science and engineering skill, and the hundreds of thousands of man-hours that have gone into developing a device compact enough to replace an incandescent bulb while using only around a fifth of the power. They were ?10 not long ago, and now you can get one for 8p.
So what would be wrong with the alien conclusion that a laptop, being even more complex, should therefore cost less? Well, some might suggest we’re already there – just look at the adverts for free laptops, which we investigate on p102, not to forget the epidemic of netbooks. Some say netbooks herald the future and that the traditional, expensive laptop is dead. Others – including me – are more cautious and worry they represent what Sony VP Mike Abary now famously called “the race to the bottom”.
Remember that, when Asus announced its Eee PC 701 back in June 2007, there was little hint of the economic troubles to come. A laptop for $200 was a massive coup, and our news story reporting its unveiling at Computex remains one of the most-read stories ever to run on pcpro.co.uk. It seemed like the dawn of a new era, and the subsequent rush from other manufacturers to get on the bandwagon is just the kind of event to make people forget about reality and start trying to convince themselves that the old rules – like the idea that laptops need to be expensive, or that you need a business model based on making more money than you spend – no longer apply. It’s the kind of phenomenon that led to the dotcom bubble, and we all know how that ended.
Large companies are like supertankers with enormous momentum – once they get going on something they can’t just turn on a sixpence, and they certainly can’t stop dead, even if they want to. It leads to bizarre products such as Microsoft’s new MSN Mobile Music service, which I’m sure must have seemed like a good idea at the time, but popped blinking out into the cold light of reality looking embarrassingly outdated.
So the netbook ship sets off, all engines full-steam ahead. And about three months later everything starts going wrong for the global economy. But by then it’s too late – the world wants netbooks and it wants them for ?300 or less. We’ve tasted the forbidden fruit and we won’t go back. Trouble is, we may have to.
The world’s fifth-largest memory manufacturer, Qimonda, started insolvency proceedings at the end of last month because of “huge industry price drops and a credit squeeze”, according to news agency Reuters. The memory business has always been a good weathervane for the industry in general, and when semiconductor manufacturers the size of Qimonda go under you know upheaval is afoot. The consensus among analysts is that the likely outcome of the loss of Qimonda is remaining manufacturers seizing the opportunity to raise prices after the crazy drops the netbook phenomenon has produced.