The wave of price increases is confirmed! Leading PC manufacturers use price increase windows to strengthen profit defenses

The Zhitong Finance App learned that for at least ten years, the PC industry has been in a state of extremely transparent prices and full competition. Manufacturers often lack pricing power in the true sense of the word, and even if costs rise, they may not be able to successfully raise terminal sales prices.

Today, things are changing.

At a time when the price of memory chips is soaring sharply, the three leading global PC manufacturers (Lenovo (00992), Dell, and HP) are expected to soon launch a rare wave of collective price increases. We believe that in this round of memory chip cost increases, major PC manufacturers have switched from “passive pressure” in the past to “active price increases”. Judging from an essential logical point of view, price increases not only mean a transfer of cost pressure, but also a long-term shift in the PC industry's pricing logic, which will unexpectedly create a good opportunity for leading PC manufacturers such as Lenovo to consolidate their profit lines.

This upcoming wave of price increases is also a signal that the capital market has been waiting for. It directly removes the profit pressure situation of PC manufacturers, returns risk to a manageable range, and will largely reverse the capital market's concerns about the profit prospects of PC manufacturers that have continued for nearly two months.

1: Return of pricing power

We agree with the widespread concerns of current investors that a sharp rise in storage costs will put pressure on the profitability of PC manufacturers. But we don't agree; this kind of pressure will put equal pressure on all vendors. Instead, we believe that this sharp rise in storage costs has given a few leading PC vendors an opportunity to stabilize their profit lines.

According to more clear information, Dell plans to begin implementing price adjustments in mid-December 2025, and the increase is expected to be between 15% and 20%; Lenovo, which has the largest market share in the PC market in the world, is expected to increase the price of its PC products in January 2026, while HP plans to increase the listing price of new high-spec products in various regions. People in the industry generally expect that in the next quarter, price increases will be a common move for the entire PC industry.

We believe that the nonlinear rise in storage costs is only the trigger for this round of price increases, and what really enabled the industry to develop the ability to raise prices and finally made the market realize that “pricing power is returning” is the maturity of three structural conditions: increased rigidity on the demand side for high-spec products, systemic supply and demand tightening due to supply-side production capacity skewed towards AI, and phased improvements in the industry's inventory and competition pattern.

The collective price increase plans of leading PC manufacturers are an inevitable choice for passive cost transmission. In a context where active price reduction promotions have failed, it is difficult for PC manufacturers to continue to absorb cost increases at the expense of profits. Second, channel inventory has been low for a long time, making it easier to adjust the price system. After 18 months of sluggish demand, the channel has absorbed most of the inventory, so manufacturers no longer need to “exchange inventory” in exchange for market share.

More importantly, the PC industry is in a product upgrade cycle in the AI era. New scenarios such as AI local reasoning and intelligent assistant functions make high-configuration products more market-attractive, while high-end products are less price sensitive, providing a more stable foundation for structural price increases in the industry.

From “the lower the better” in the past to the “higher value restructuring” today, the PC industry is undergoing fundamental changes in pricing logic. In other words, behind the wave of price increases is a shift in the industry from price competition to value competition, and this transformation has provided new profit margins for larger manufacturers with stronger supply chain capabilities.

In other words, this is not a strong price increase in the traditional sense; it is the first time that the industry has made a systematic adjustment under multiple conditions of “having the ability to increase prices.” The true meaning of this “return to pricing power”: it's not that manufacturers “want to rise,” but that the industry has the conditions to “be able to rise” for the first time.

At this stage, storage capacity is structurally tight, which also makes manufacturers “need to increase prices.” Pricing power requires not only demand-side acceptance, but also supply-side structural scarcity. The key to this rise in storage costs is not cyclical fluctuations, but rather a long-term gap formed after production capacity was squeezed out by AI servers.

The factual background that has already happened includes major Korean storage companies channeling production capacity to HBM and high-bandwidth DRAM on a large scale; HBM's profit margin is far higher than PC DRAM, making manufacturers unwilling to quickly make up PC materials; and NAND production capacity is also tight due to rising demand for mobile phone flagships.

As a result, the PC industry is facing not a “short-term price increase,” but a “long-term cost curve rise.” When upstream supply changes are structural rather than cyclical, downstream manufacturers' price increases are sustainable. This forms the second basis for the return of pricing power: it's not that manufacturers want to rise, but “if they don't rise, they will lose money.”

The reason we believe that improvements in the industry's inventory and competitive landscape have provided an “execution basis” for price increases is because the biggest factor suppressing PC prices for at least ten years is excessive inventory and price war pressure. However, after a cycle of 3 to 4 years, the industry experienced the most thorough inventory clearance cycle. Channel inventory has been low in recent years, promotion efforts have returned to normal, and manufacturers no longer exchange prices for shares.

Therefore, the meaning of the so-called “return of pricing power” is the first time that manufacturers have the ability to increase prices without significantly losing sales; moreover, price increases can be continued, not reversed in short-term promotions. The price system changed from being forced to follow costs in the past to actively managing profits, which eventually forced the PC industry to shift from competing for share to competing for profit quality.

2. Moving from “price war” to “value competition”

In the above, we mentioned that a sharp rise in storage costs will put pressure on the short-term profitability of PC manufacturers, but we don't agree that this pressure will put equal pressure on all vendors. On the contrary, we believe that this sharp rise in storage costs has given a few leading PC manufacturers an opportunity to stabilize their profit lines.

Take Lenovo Group as an example. As the largest manufacturer in the industry with the strongest supply chain capabilities, this company has benefited the most from the profit and valuation increase brought about by the return of pricing power.

According to a November report by Morgan Stanley, the current memory chip supply chain has begun to show a two-level differentiation: manufacturers with locked contracts can maintain lower costs, but those who are not locked in are forced to grab goods at high prices in the spot market. This is the core cause of the profit differentiation of PC manufacturers. The report argues that this round of price increases is not a “price issue,” but a “supply issue.”

In an interview with Bloomberg earlier, Lenovo Chief Financial Officer Zheng Xiaoming said that Lenovo is stocking up to deal with memory shortages and price increases, and the inventory level of key components is already 50% higher than normal.

Therefore, we believe that based on global supply chain management capabilities, for an absolute leading company such as Lenovo, which accounts for more than 25% of the global PC market, in a long-term perspective, this wave of terminal price increases will even become a rare opportunity for them to raise their gross profit level. Because it has industry-leading advantages in supply chain cost management, procurement negotiation power, and inventory optimization, it is more resistant to cost fluctuations.

For example, Lenovo has better price-locking capabilities by signing long-term procurement frameworks with major storage vendors. In a cycle where costs rise rapidly, a locked price window can effectively smooth the upward rate of costs and provide a buffer for profits. This allows Lenovo to maintain a healthy rhythm between product price and cost changes during the price increase cycle.

Over the past few quarters, three leading manufacturers, including Lenovo, HP, and Dell, have maintained healthy inventory levels. When industry inventories were generally high, Lenovo was one of the first manufacturers to optimize inventory, so its inventory cost when entering the price increase cycle was significantly lower than the industry average. After a new round of cost increases, Lenovo's old inventory turned into a gross profit advantage.

More importantly, the price increase cycle just overlaps with Lenovo's own product structure upgrade. Increased demand for high-spec models of AI PCs allows Lenovo to more clearly promote high-margin product portfolios in the price increase window. From enterprise-grade commercial PCs to high-end consumer PCs, the share of high-spec models in Lenovo's overall shipments has increased, resulting in a natural improvement in the gross profit structure.

Among the top three PC manufacturers, Lenovo is the PC manufacturer with the greatest profit flexibility in the price increase cycle. The reason for this is not that the price increase was higher, but that the profit improvement effect after the price increase was more significant. This is due to the combination of its scale advantage and supply chain advantage.

We believe that the wave of price increases is not a last resort for leading PC manufacturers, but rather a structural opportunity to consolidate profits and expand their leading edge.

3. Reversal of capital market sentiment

Over the past two months, the capital market's general concerns about the PC industry did not stem from the demand side, but from the cost side. Investors worry that when storage costs rise sharply, PC manufacturers may not be able to successfully raise prices due to weak consumer demand, and there is a risk that profits will be eroded.

We believe this concern may soon be reversed.

In fact, the upcoming wave of price increases is a signal that the market has been waiting for. It directly removes the profit pressure situation of PC manufacturers and returns risk to a manageable range. Moreover, we believe that the price increase itself is only the first step. In the medium to long term, what is more influential is the combined effect of price increases and product structure upgrades.

For example, improved gross margins, high price structures, and increased demand for high configuration will structurally increase the profit margins of the PC business.

The trend of AI PCs is driving larger memory capacity and stronger computing power, increasing the penetration rate of high-end models. The increase in industry prices provides a higher margin base for such products. Especially for manufacturers such as Lenovo, which have a strong position in the high-end market, the margin improvement will be slightly higher than that of peers.

In PC manufacturers' financial statements, the fee structure will be optimized as a result. Because scale expansion can improve operational efficiency, when the price system is adjusted, brands do not need to rely on promotion costs in exchange for sales volume, and marketing expenses and channel subsidy costs will naturally decrease. The scale of Lenovo's global operations makes its cost efficiency improvements even more leveraged.

The quality of cash flow will also change as a result, and a more controlled pricing system means a healthier cash conversion cycle. In an environment where the price system is relatively stable and profits are more clear, dealer inventory risk has decreased and the account structure has improved, which is beneficial for Lenovo to improve the quality of operating cash flow.

From an essential logical point of view, price increases not only mean a transfer of cost pressure, but also a long-term shift in the PC industry's pricing logic.

For investors, what they should think about is whether PC manufacturers' valuation frameworks should be re-evaluated after the storage price increase cycle is over. This is because the wave of price increases has provided the capital market with an opportunity to re-evaluate leading companies, that is, the transformation from price competition to value competition, which will form the basis for re-anchoring their valuations in the long term.