Tuesday, August 9, 2022

Chinese currency move won’t affect PC costs

China’s currency revaluation raised the cost of paying worker salaries at the thousands of electronics factories across the nation, but that won’t impact end-user prices for IT goods like PCs and servers, analysts say.

On Thursday, China dropped a decade-old peg to the U.S. dollar and said it will allow its renminbi currency to fluctuate more freely against a group of currencies. Initially, the change amounts to a 2 per cent rise to 8.11 renminbi per dollar. Before the revaluation, a dollar bought 8.28 renminbi.

It may seem like a small change, but currency fluctuations can have a huge impact on product prices — and China makes more notebook computers, PCs and other finished electronics goods than anywhere else.

“Even though the majority of this equipment is built in China, [the revaluation] will have a fairly small impact on the cost of making these products,” said Flint Pulskamp, an analyst at market researcher IDC in San Mateo, California.

The majority of PC and laptop parts — and the most expensive, like central processors and flat screens — won’t be affected by the currency change anyway because they’re not made in China. Labour is the main value added at Chinese electronics manufacturing plants, and that’s a fairly small part of overall cost, said Pulskamp.

The stronger renminbi also offers some benefits to companies operating in China that should help offset higher labour costs. Since most global commodities and even computer parts prices like DRAM are quoted in U.S. dollars, Chinese factory owners should be able to get more for their money thanks to the currency change.

For example, Merrill Lynch estimates that Canon Inc. will have to pay an additional

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Jim Love, Chief Content Officer, IT World Canada

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