"First,the argument readily assumes that the challenge of decreased sales could only be met by decrease in prices." --- not at all! The argument only says that the problem of declining sales could be solved by dropping prices. It never assumes that this is the only possible solution. I do like all the other suggestions given such as marketing, amended design, etc. However, these suggestions have nothing to do with analyzing the original argument.
"By stating this , author generalizes that competition is merely due to price of a product,however there could be some other key factors influencing the competition." --- this is a good point. However, it should be developed in order to become relevant. You can say, for example, that dropping prices always comes at a cost, and that the money can be instead spent in a different way. Conversely, you could say that competitors don't have to drop their prices in response, but can instead invest more money into e.g. producing high-quality chips or marketing their chips as high quality.
"The argument assumes correlation as causation" --- I fail to see where the argument assumes correlation as causation.
"By stating this factor,author fails to give examples based on which author claims the full dependency of sales on price of computer chips." --- I don't understand what this sentence means. I suggest it should be reworded or eliminated.
"Second,argument claims that by dropping its prices, Davis would better be able to compete in the highly competitive market.Clearly,this statement is an
exaggerated one as the competitors could use same strategy of dropping prices" --- Good! Here we have one valid point. (Note, however, that the word "exaggerated" is not suitable in this context. You can say "this statement is a stretch".) Yet there is more to be said. Even though the competitors could use the same strategy in dropping prices, Davis may still become more competitive if its cost of producing computer chips is lower. Conversely, if Davis has high costs of producing computer chips, then dropping prices may actually make it less competitive, since it will soon go out of business.
"The argument could have been made more sound had author would have given several examples of the causal effect of prices on sales and market share." --- excellent point!
I am also not sure about the connection between sales and the market share. Do we measure the market share in sold chips or in dollars? If we are using dollar market share, then with more units sold for a cheaper price Davis may or may not increase its dollar market share.
"Implicitly,the argument is weak in not considering all contributing factors for increase in sales." - you are using the wrong template
The increase in sales has not yet happened. We do not even know if it is possible. Thus, it is somewhat illogical to discuss "contributing factors for increase in sales" at this point.
"The argument could be strengthened if author provided ample examples for the stated causal relation of price and sales." --- yes!
Overall the reasoning is pretty good. There are some relevant ideas such as that price is not the only way to compete, that competitors can also drop the prices, that it would be nice to have some examples of the causal connection between the price and the sales. The way this reasoning is expressed is confusing. It seems to me that too much emphasis was put on following the template which, apparently, does not quite fit this particular question.
Keep it up!