PC bill of materials creeps higher

Summary:Vendors will face higher costs to make PCs throughout 2012. Apple is catching a break on NAND prices.

The cost of making a PC is moving higher as DRAM and hard drive prices remain high, according to Barclays Capital.

In a research report, Barclays analyst Ben Reitzes said that DRAM prices have increased. Hard drive prices are stable at higher levels due to the Thailand flooding last year. In 2011, the bill of materials for PCs fell every month of the year. In 2012, the bill of materials for laptops was up 1 percent year over year for January, February and March.

Reitzes' overall theme is that profit margins for PC vendors peaked at the end of 2011 and vendors will face higher costs for components such as panels. Labor costs may also increase. Overall, component costs may rise into the second half of 2012 as Intel's Ivy Bridge processors and Windows 8 hits the market.

At some point, PC vendors are likely to pass those costs along to customers if the bill of materials moves higher too much.

Oddly enough, NAND prices continue to fall and that benefits Apple and its iPad profit margins.

Here's a look at the components in a PC worth watching:

  • Hard drives. Reitzes said that prices could move higher from March but hard drive availability will improve in June as Western Digital regains capacity. Hard drives account for 12 percent to 14 percent of a desktop's bill of materials and 11 percent to 12 percent for a laptop. Apple is least impacted due to the use of solid state drives for MacBook Airs and iPads.
  • Panels. In March, panel prices for 14-, 17- and 19-inch displays were flat, but prices could move higher as vendors look to restock ahead of Windows 8. Panels are 15 percent to 17 percent of desktop bill of materials and 8 percent to 11 percent for laptops. Reitzes said higher panel prices would shave 75 basis points off of Apple's gross margins and 85 basis points for Dell and HP.
  • DRAM. Prices increased 8 percent in March compared to February, which showed an increase of 7 percent from January. DRAM should see better pricing in the second quarter. DRAM prices will bounce a bit from current levels, but are still down about 46 percent from a year ago. DRAM is 3 percent to 4 percent of desktop costs and 2 percent to 3 percent for laptops.
  • Processors. Average selling prices for processors are expected to remain stable. Intel will benefit from its Ivy Bridge launch. Processors are 11 percent to 22 percent of desktop costs and 11 percent to 28 percent of laptop bill of materials.

Topics: Processors, Hardware, Laptops

About

Larry Dignan is Editor in Chief of ZDNet and SmartPlanet as well as Editorial Director of ZDNet's sister site TechRepublic. He was most recently Executive Editor of News and Blogs at ZDNet. Prior to that he was executive news editor at eWeek and news editor at Baseline. He also served as the East Coast news editor and finance editor at CN... Full Bio

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