Smuggling crackdown hits Guangzhou prices

In the labyrinth of hallways in the New Concept Computer City in Guangzhou's Tianhe district, there is furtive talk of the government's summer smuggling crackdown, which has not only raised the prices of imported personal computers, but also cut the availability of CPUs and other components.

'Intel chips are about 10 per cent higher,' grumbled Liao Chongwei, general manager for Guangzhou Decision Science & Technology Corp. 'That's too expensive.' Guangzhou Decision Science, like many of the 130 or so vendors at New Concepts, is a components retailer and chop-shop PC assembly house, building home-made computers for under US$1,000. Nearly a third of PCs sold in the mainland last year were so-called 'clones'.

Rather than drive up prices by continuing to use Intel chips, Mr Liao said his company had started to use Advanced Micro Devices' K6 chip.

Over at New Concept's exclusive Compaq sales shop, Zhu Yunpeng explained that the government campaign had added a 5 per cent premium to his pricing. However, Mr Zhu added, since his computers cost on average 30 per cent above the local competition, customers were willing to shoulder the difference.

'Sales may have dropped a little,' he said. 'The biggest difference is there aren't as many wholesale companies to supply us as before.' Dai Jindong, who is a wholesale distributor of Taiwan-manufactured Sceptre-brand main boards, said it was now more difficult to get products. That, he expected, was likely to make business difficult as his company sold more than 10,000 main boards on average per month.

'Prices haven't gone up yet, but they certainly have to,' Mr Dai said.

Mr Liao explained his greatest headache was not the anti-smuggling campaign, but the excessive competition in Guangzhou's computer market.

He pointed out that in the city's Tianhe district alone, there were eight similar self-styled computer cities vying for customer dollars. 'There are just too many of these kinds of computer markets,' he said.

Mr Dai, who has ambitions of starting his own hardware or software brand, agreed competition was heated. But, he said, that did not mean business was slack.

'The Guangzhou market is saturated, but this market is huge,' he said. 'It all depends on who you are, what you do, and where you are willing to take it.'