The group set up to produce a “hundred dollar” laptop that could be supplied cheaply to school children in developing countries has announced a sharp price rise – to $175 (£87.50).
The One Laptop Per Child (OLPC) group now has orders for 2.5m units, but needs to reach 3m by 30 May in order to ensure production gets going.
OLPC founder, Nicholas Negroponte, said: "We are at the most critical stage of OLPC's life. A year and a half ago, we were selling a dream, but it's easy to sell dreams if you're passionate and can share that passion with other people. But that was dreams, and now we've got to launch. We need 3m units to trigger the supply chain."
The OLPC project is aimed at creating a durable, power-efficient laptop PC that is cheap enough for developing nations to use as a common classroom tool. The not-for-profit OLPC organisation has recently struck a deal with Citibank to handle the administrative side of the business.
OLPC has distributed about 200 beta versions of its XO laptop to each of the seven countries that have made commitments to bulk ordering so far: Brazil, Argentina, Uruguay, Nigeria, Libya, Pakistan and Thailand. The group has also sent nearly 2,000 laptops to software developers around the world.
Negroponte did not say where the 500,000 extra orders would come from, but said Peru and Russia might join the group. He had also fielded inquiries from 19 US states, a demand that has softened his previous resistance to selling the PCs in U.S. markets from "never" to "maybe".
If OLPC meets its sales goal, it intends to quickly boost production, reaching levels of 400,000 a month almost immediately after the 20 September launch date. Manufacturer Quanta Computer of Taiwan would produce 1m laptops by the end of 2007 and 3m within nine months of the launch, said OLPC chief technology officer Mary Lou Jepsen.
Negroponte said the price of the laptop would fall again once production hits this volume. "The manufacturing cost of these laptops is $175. We'll charge maybe $176 to cover the cost of these offices. Usually 50% of the cost of a laptop is sales and marketing, distribution and profit, but we don't have any of those things.”
He also pledged that OLPC would readjust the price every business quarter, leading it to drop about 25% within a year. Negroponte said he had learned from his experience on Motorola's board of directors that the price of most electronic goods dropped about 50% every 18 months.
In response, most vendors added new features, hoping that consumers would pay at least the same price next year, he said. "But what happens with laptops especially is that you end up with a bit of bloat.
“My laptop has never been less reliable than it is now. It crashes three or four times a day, and I'm getting tired of the little sign saying 'Do you want to tell Microsoft about it?'
In contrast, OLPC designers would keep the XO design trim, holding its average power consumption between 2W and 4W. Instead of selling more expensive PCs, the group's business model relies on large scale sales, rising from between 3m and 5m units in 2007, to a range between 50m and 150m in 2008.
Large PC vendors were growing nervous as OLPC nears its launch date, pushing Microsoft to offer a $3 version of Windows Vista and chip maker Intel to create the "Classmate" notebook PC design for developing nations, Negroponte said. "Bill Gates said 'Get a real laptop,' but when your house doesn't have electricity, two watts is a real laptop.”