The Computer Buzz
||October 12, 2006|
Nome and Paul Van Middlesworth - owners - The Computer Factory
PC Prices Going Up?
Each month we review the basic configurations and components of our PC product line. The idea is to make sure we are using the latest established technology and that we are building configurations that match mainstream user requirements. We then create "bills of material" for each basic system and run the costs. We total materials and labor costs, add our mark-up and, voila, we have our new PC prices.
Usually this process results in adding features or capabilities with little or no change in prices. For the past eleven years, the price of our most basic PC workstation has stayed around $550 with speed, features and functions increasing dramatically.
This month we ran the numbers and found that prices actually went up. The reason is a spike in the cost of DDR2 RAM.
While we were able to hold pricing on our basic Sempron PC workstation with only 512Mb of RAM but we had to raise price somewhat on the higher end PC workstations that include 1.0 Gigabytes of RAM.
RAM usually represents about 10% of the material cost in a PC. In the past two months RAM prices have nearly doubled.
In terms of price, RAM (random access memory) has always been by far the most volatile PC component. Over the years we have seen several dramatic run-ups in RAM prices. Typhoons, earthquakes, dock strikes, technology changes and demand patterns have created shortages that cause spikes in pricing that may double or quadruple the price of RAM in a matter of days.
RAM is air freighted to the west coast daily from Asian manufacturers. Because of the price volatility, very little RAM is held in inventories. When some event interrupts supplies or when demand increases rapidly, shortages occur and free market forces drive up prices.
The current shortage is a result of two factors. All the newer Pentium PCs use DDR2 RAM. This summer AMD reengineered its CPUs so that they too use DDR2 RAM. The added demand coupled with increasing demand for PCs in the booming Asian economies has outstripped worldwide DDR2 manufacturing capacity.
Exactly the same thing occurred when Intel introduced the Pentium IV in the year 2000. Intel tried to force PC makers to use their homegrown RAMBUS RAM design. PC makers rebelled against using Intel's expensive RAMBUS RAM. When Intel started to lose market share to AMD they quickly redesigned their PIV CPUs to use conventional SDRAM. The increased demand resulted in a months long shortage of SDRAM and a considerable run-up in prices
DDR2 RAM prices will continue to rise for a few weeks more and then drop like a stone in November as PC makers finish stocking up on the DDR2 RAM needed for Christmas PC sales and the RAM manufacturers bring added capacity on line.