PC bill of materials creeps higher

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

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  • So the Windows Tax is 75 USD?

    I assumed it was pretty much zero, net of the bloatware.
    Marco Parillo
  • Why not?

    There just doing what every American Company are doing Gouging.

    I thank most folks have PC and arent thanking of buying another one anytime soon.
    Too bad unlike the Oil Companies we don't have to buy Computers.
  • Build it yourself

    Still home builts are fairly cheap and can be the best with OEM OS of your choice.
  • For what most people use PCs, what they have currently should be good

    enough for a few more years. Heck, for what most people use the current tablets and smartphones, they too should be good enough for the next few years. The only manufacturer/vendor that's immune to the "good enough" market conditions, is Apple, because, they have a special relationship with their fanatical consumers who will purchase the next incremental upgrade, even if it's not needed.

    But, with the current economic conditions, and with most technology being more than good enough for what people do with them, then, it makes no sense to make new purchases.
    • I agree completely!

      At home, I still use a P4, 2.6 GHz box with XP. It does everything I need for a home computer. It is still faster than my internet connection, so a newer system isn't going to have much advantage for me.

      At work, (I am in IT,) I have been asking for a new tower so I can take advantage of the built in visualization. I want to be able to use virtual machines on my desktop without dragging the native OS down. Also, I use Win7 because I have to support users using Win7. Otherwise, a P4 and XP would suffice there as well.

      Most people do not need a new PC. (Most people I help outside of work think they need a new PC when they really need malware and crapware removed, a RAM upgrade, and a good defragging.)
  • Pricing is key....

    This is one primary, understated reason for the success of tablets. They're lower priced (even the iPad) when compared to PCs and perform most tasks an average home user needs.

    • For the price of an iPad, I can get a PC with "supercomputing" power,

      which means, a computer with 4 or 6 core CPUS, and with storage in the terabytes range, and with 4 or 6 gigabytes main memory, a screen with resolution that rivals the iPad2 or any other tablet, with ports for connectivity to other devices, and with the capabilities to run just about any application that was designed for Windows 7 and Windows 8.

      As far as I know, neither the iPad2 nor the iPad3 nor any other tablet can get even close to the power and features I mentioned above for around $500. Now, for the price of a bigger memory iPad2 or iPad3, I can get a PC with even more power and 2 or 3 terabytes of storage and 8 to 12 gigabytes of main memeor and even rewritable CD capabilities, and better screen resolution.

      With the the PCs I described, I could be running many different applications at the same time while doing web browsing of multiple sites, and actually have a lot of resources left over for other things. The iPad will be, in comparison, working as if it were doing the type of computing that people used to do 20 years ago on the ancient computers, except, the ancient computers would still be far more practical.

      So, your argument is very much destroyed, and no tablet, not even the newest iPad3 can come even close to the power that can be had on even the lowest of PCs, including the lowly notebooks and netbooks.
  • You must see

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  • A bit much.

    When you add the taxes you end up paying over $800 bucks. No thanks.
    Like the other poster said, What I have now is good enough. Or like the other poster said a guy can build his own. By scrounging parts and getting Windows from a discarded computer and also a free Linux flavour a guy can have a good affordable computer that does everything well. This works good unless you need one right away. I know that not everybody can do this and I feel for you guys.
    Rick Sos
  • Don't forget

    Foxconn's giving raises. What's the labor cost to put it all together?
    • 50 cents per hour

      In a truly global economy, prices would be on par with wages.

      Instead of the predatory, manipulative leeching going on (offshore the labor costs to pocket the difference as "profit" and then sell it back in the country, hoping enough people still make the wages so they can buy and in turn allow the company LEGITIMATE profits in the process...)

      A device that costs under $200 to build should not be sold for $699 (sans contract) or whatever.


      Still, Henry Ford had a point about the value of labor... as did Abraham Lincoln and other people who knew basic things about the concept of "freedom"...

      These days everything gets moved around, to where labor is undervalued and the products made are overpriced. Or at least depending on region - if 50 cents per hour allows China to build a middle class, why can't 50 cents per hour in developed countries? ;-)
      • Update your thoughts

        It came out during the Apple/Foxconn investigation that people were making $1.60/hr or more. Their wages are growing.

        Manufacturing jobs will begin to leave China sooner than you think.
      • We cannot work for...

        We cannot work for $2.00/hour and support ourselves, much less a family! Don't bring us down to China's poverty to compete, bring them up to our level. If you really think its such a good idea to work cheap, go get yourself a job stocking shelves at Walmart!
  • Since companies are not allowed to take hits, somebody else has to take the


    And that's we, the customers. Or as the laborers.

    Or both.
    • Right, and wrong...

      Look, the consumer can "take the flak", but, only for so long. As laborers, there is also so much that employees are willing to put up with.

      Eventually, something has to give, and, it's either the employee or laborer or the consumer, or the companies. The most important component in that interrelationship, is the consumer, who, if he/she decides enough is enough, then everybody takes the hits, including the company and laborers and consumers.