Japan's cost-squeezed NEC considers PC price hike

By Mayumi Negishi

TOKYO, Aug 12 (Reuters) - Japan's No.1 PC maker NEC Corp (6701.T) is considering a hike in wholesale prices of new personal computer models to offset rising costs, it said on Tuesday, but the plan could mean losing domestic market share.

Foreign makers like Dell Inc (DELL.O) and Hewlett-Packard Co (HPQ.N), helped by favourable currency rates, are undercutting their Japanese rivals with double-digit percentage gains in unit sales.

NEC and its original equipment manufacturers are being squeezed by falling prices and the rising cost of plastic, shipping and labour in China, where the computers are made.

The cost increases are outpacing price falls in PC memory, hard drives and displays at NEC, said spokeswoman Mari Takahashi.

"We are considering a way to better reflect these rising costs in the prices of our next PCs," she said, but declined to comment on size of the price hikes under consideration for new models to be launched later this year.

NEC's personal computer sales are almost entirely limited to Japan.

Analysts say NEC, which commands 21 percent of Japan's PC market, may decide not to push ahead with price hikes if retailers say they won't accept them and the potential drop in market share looks too great.

"Lifting prices as competitors' prices are sliding could spur consumers to move away from NEC," said Masahiro Katayama, manager of IDC Japan's PC research group.

"One option might be to keep its prices level and lower performance specifications on its PCs."

The average sales price of home-use computers in Japan was 122,900 yen ($1,116) in January-March, down 5.4 percent from the previous three months. That was likely to have fallen another 6 percent to 7 percent in April-June on brisk sales of low-cost PCs, Katayama said.

NEC's personal solutions segment -- which includes modems, faxes and Internet service provider operations as well as PCs -- accounted for 7.7 percent of its operating profit and 12 percent of total sales in the last business year.

Given the price competition, Fujitsu Ltd (6702.T) and Toshiba Corp (6502.T) may be reluctant to also raise prices.

Fujitsu, the No.2 maker, will not hike prices even if NEC succeeds in convincing retailers, a Fujitsu source said, declining to be identified. (Editing by Edwina Gibbs)