PC manufacturers have traditionally used falling component prices to drive PC prices lower where they have been able to make up for shrinking margins with higher volumes. For companies like eMachines, whose profit margins are much smaller than the Dell and Gateway's of the world, these are difficult times. The box makers are thus faced with three choices, neither one which will please investors. One option is to absorb the higher cost of components, thus cutting even further into those razor thin margins. The second option is even more risky and that would be for the manufactures is to push the higher costs back onto the consumers in the form of higher prices.
Some insiders think that there is a third option.
Slower holiday PC's will have a profound impact on the stock market. The Taiwan situation does not affect just the computer manufacturers like Dell and Compaq. Weak holiday sales for PC will also effect the value of ISP stocks like AOL, Earthlink, Prodigy and OneMain who rely of the holiday season for a lot of their new customers growth. Less new computer users, also means less eyeballs visiting Internet sites like Yahoo, eBay and Amazon, which will drive down their share prices also. And with the technology sectors large influence on the overall stock market, I expect a lot of downward pressure on stocks as we near the end of the year.