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During the beginning of the 21st century, the growth in computer sales declined for the first time in almost two decades. As a result, PC makers dramatically reduced their orders of computer chips from Intel and other vendors. Explain why computer manufacturers such as Dell are likely to write relatively short contracts for computer chips.

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jepessoa

Answer:

The market for personal computers is extremely competitive and uncertain, since technological obsolescence happens really fast. For example, during those years better computer chips were continuously launched, even operating systems were launched almost every year, e.g. Windows 98 (1998), Windows 2000 (2000), Windows ME (2000), Windows XP (2001).

Since the life span of computer ships was extremely short, then the risk of signing long-term contracts was extremely high. Once a new chip was launched, the price of older chips decreased severely, so it was better to sign short-term contracts.

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