PC Prices Set to Plummet in 1994

PC prices are expected to continue dropping throughout 1994 while performance increases, with high-performance machines becoming the standard in many homes and offices. By the end of 1994, PCs powered by 66-megahertz 486DX2 and Pentium processors will be the norm, while the old 386 processor will be a distant memory. The price wars of the past two years have been fueled by vendors like Compaq, IBM, and Apple cutting margins to the bone, and now PC components, particularly hard drives and microprocessors, will continue to drop rapidly.

Key Takeaways:

• Intel, the company that designs and makes the processors used in the majority of PCs, has reduced prices of its 486 and Pentium processors by up to 10 percent, with further cuts planned in April, including a 3-18 percent reduction.
• The price of the high-performance Pentium processor has dropped from $1300 to less than $1200, and will drop to around $1000 in April, potentially half that by the end of the year.
• The 33-megahertz 486 processor has seen a price reduction from $1500 to $400, and will drop to $390 in April.
• The 25MHz 486SX processor will see a relatively smaller price reduction, from $120 to $114.
• The lowest-priced personal computers, those currently in the under $1500 bracket, are unlikely to fall much further in price.
• However, prices in the mid and high price range should certainly fall, while performance will increase sharply, with outlaying $2000 to $3000 on a computer getting roughly twice the performance the same money would buy today.
• Intel's cuts follow a big increase in Pentium production, with five plants fabricating millions of the high-performance processors, and estimates that Pentium will represent 25 percent of its total chip production by the end of 1994.
• The first serious challenge to Intel's domination of the PC processor business is the PowerPC, a low-cost, high-performance chip designed by an alliance of IBM, Apple Computer, and Motorola.
• The PowerPC chip uses a simplified architecture known as RISC, which gives it significantly better performance than Intel's Pentium at a fraction of the cost.

Statistics:

• 10 percent reduction in price of Intel's 486 and Pentium processors.
• Less than $1200 for the high-performance Pentium processor.
• Around $1000 for the Pentium processor in April.
• Potentially half that price by the end of 1994.
• $1500 to $400 price reduction for the 33-megahertz 486 processor.
• $390 price for the 33-megahertz 486 processor in April.
• $120 to $114 price reduction for the 25MHz 486SX processor.
• 25 percent of Intel's total chip production to be Pentium by the end of 1994.
• Five plants fabricating millions of Pentium processors.

Sources:

• David Frith, "PC Prices Set to Plummet in 1994," [No publication date specified].