Due to rising prices, memory’s share of the cost of PCs has more than doubled to 35 percent.
Last quarter, memory costs accounted for fifteen to eighteen percent of the total bill of materials for a new computer. This quarter, that share has doubled to 35 percent, HP announced during its Q1 earnings call.
The increase is a direct result of rising memory prices. This, in turn, is caused by limited supply, as HBM memory for AI applications consumes available manufacturing capacity.
Overall price increase
The doubling in percentage is striking nonetheless, as the AI hype is also impacting other components. For instance, SSD prices have also risen, yet RAM still accounts for 35 percent of the component cost.
For its part, HP has secured contracts with suppliers for the coming year. Furthermore, the company is actively seeking and finding new component suppliers to guarantee its supply chain.
Product adjustments are also on the agenda. Like other PC manufacturers, HP must make do with the resources available. This means the company has to rethink which configurations are attractive to bring to market, given the higher prices. It seems likely that over the coming year, we will see entry-level configurations from HP and other manufacturers with slightly less RAM than would have been the case last year.
Regardless, these costs will be passed on. This applies not only to HP, but to all PC, server, and smartphone manufacturers. Lenovo, for example, announced this week that hardware prices will soar starting in March.