Cost of making PCs is rising

Cost of making PCs is rising

Summary: The cost of making a PC is moving higher as DRAM (dynamic random-access memory) and hard drive prices remain high, according to Barclays Capital.

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The cost of making a PC is moving higher as DRAM (dynamic random-access memory) and hard drive prices remain high, according to Barclays Capital.

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 per cent year over year for January, February and March, according to a research report by Barclays.

Barclays analyst Ben 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. He said that DRAM prices have increased. Hard drive prices are stable at higher levels due to the Thailand flooding last year. Labour 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.

(Credit: Gartner and Barclays)

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 per cent to 14 per cent of a desktop's bill of materials and 11 per cent to 12 per cent 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 per cent to 17 per cent of desktop bill of materials and 8 per cent to 11 per cent 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 per cent in March compared to February, which showed an increase of 7 per cent 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 per cent from a year ago. DRAM is 3 per cent to 4 per cent of desktop costs and 2 per cent to 3 per cent for laptops.
  • Processors: average selling prices for processors are expected to remain stable. Intel will benefit from its Ivy Bridge launch. Processors are 11 per cent to 22 per cent of desktop costs and 11 per cent to 28 per cent of laptop bill of materials.

Via ZDNet US

Topics: Apple, Laptops, Mobility, Storage

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2 comments
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  • Classic supply and demand economics.
    Since 2010, Apple has been removing the userbase of PCs.
    This has created a slowing in demand and of course that means price hike, as overall volume is shrinking.
    Microsoft's new Windows 8 is designed for tablets not PCs, further reducing the demand.
    cootified
  • So how has Apple been removing market share from PC's - are they purchasing mac's? or did you mean that people are moving away from PC's to tablets?
    amckern-b0f83