The price of laptop computers has fallen at an estimated annualized rate of 4.3% in the three years to 2017. Market prices have been steadily falling for more than a decade, due in part to the reduction in computer hardware and software costs in accordance with an observation referred to as Moore’s Law. Moore’s Law states that the number of transistors on an integrated circuit doubles every two years due to technological advances, which results in cheaper production costs for suppliers. Additionally, software prices have fallen with the introduction of more advanced programming languages and developer tools. Because most laptops are priced according to the cost-plus model, drops in hardware components and software licensing costs have led to an overall decline in laptop prices.
Demand trends have had a mixed effect on price during the three years to 2017. Growth in per capita disposable income and private investment in computers and software has led to rising consumer and business demand for all computing goods, including laptops. However, this demand has been mitigated by the exploding popularity of smartphones and tablets. Prior to the introduction of smartphones, buyers with mobile computing needs could only buy laptops; now buyers have more choices, and laptop vendors have been forced to lower their prices to hold on to their share of buyers in the face of the fast-growing tablet and smartphone markets.
Input cost stability has allowed vendors to accurately forecast their overall operating costs in the past three years; which has in turn yielded steadily falling laptop prices. Low price volatility benefits buyers because it helps them better anticipate price trends, and allows them to take their time in purchasing decisions.
The price of laptops is expected to continue falling at an annualized rate of 2.4% in the three years to 2020. ProcurementIQ expects that suppliers’ hardware and software costs during this period will continue on a steady decline. Hardware and software licensing represent the bulk of manufacturers’ purchase costs, so as they decrease in price, market prices should fall as well. Manufacturers’ wage costs are also expected to continue falling as a share of revenue due to the rising prevalence of automated production processes, thereby reducing suppliers’ reliance on labor.
Recent demand trends are expected to continue in the three years to 2020. Growth in per capita disposable income, and private investment in computers and software will continue to support consumer and business demand for computers. Although laptop demand is expected to rise somewhat, overall demand growth will be limited by the continued expansion of the tablet and smartphone markets. However, adoption growth is expected to decelerate in the next three years, because these alternate devices are reaching saturation and will therefore have less of an impact on laptop demand. Nevertheless, the introduction of new features, such as detachable keyboards, means that tablet computers will continue to cut into the demand for laptops.
Steadily falling laptop prices will ultimately boost buyer power by making it easier for buyers to put off making purchase decisions based on concerns about price increases. It is recommended that buyers wait as long as possible before buying new laptops because prices are projected to continue to drop. In addition, expected low price volatility allows buyers to accurately budget for laptop procurement due to a decreased risk of drastic price shifts. Also, laptop computers are increasing in quality and performance, so it may be a particularly good idea for buyers with high-level computing needs, such as graphic designers, to wait to procure laptops.