This is a good point. I've always wondered why PC components have always been priced with total transparency and razor-sharp margins unlike most other kinds of tech.
that's almost all wrong. it's mostly commodity hardware, and their margins are thin only because they're a gigantic company. smaller companies can and do offer much better pricing, they just don't have the marketing budget to convince you of it.
No doubt a substantial amount of that margin comes from the economies of scale where you only have a handful of SKUs with comparable sales to some of the PC manufacturers with many more SKUs combined.
The headline seemed silly to me, as a technologist, as the interpretation of 'any' is highly subjective. But the point Mossberg makes in the article indirectly (or perhaps inadvertently) is that ARM and Linux have crushed the margins out of low end CPUs and operating systems (with a bit of help on OS pricing from Apple).
The insight here is that the two most expensive "parts" of a PC have always been the CPU and the OS license. Intel derived fat margins on their CPUs as the only game in town (sometimes illegally hindering rivals) and Microsoft derived fat margins by being the only OS worth having given the breadth of software available for it. The combination, the so called Win-Tel hegemony, was dominant for years.
And the tricky bit is that typical mark-up for a hardware device was 3 - 4x the price of the parts to build it. That multiple takes into account things like warranty returns, unsold inventory, losses in shipment, and two channels of distribution mark up. So priced at X the device sells for 1.4X to distributors, and then 3x to consumers. But the interesting side effect there is that every $1 you take off the price of components is $3 less at the consumer level.
As ARM chips got more capable, and Linux became more acceptable, I mark the beginning of the end as the day Asus shipped its first NetBook running Linux in 2007, and then tried to ship an ARM powered laptop a year later.
That stunt allowed ASUS to wrangle a nearly zero cost Windows XP license for its Netbooks from Microsoft. And the Atom chip, which Intel was pushing for "embedded" applications against the fast growing ARM franchise, had the lowest margins yet for a GenuineIntel processor.
With margins on the CPU and OS under assault, the whole value chain began to normalize around the minimum quality cost of the components. Combine that with the advancement of capability with process shrinks at the same price, and eventually the processors you could use would have the same capabilities as the "high end" ones did back in 2007.
The net result has been that things like the Raspberry Pi are possible, a $35 dollar computer that out performs machines from the turn of the century, but were reasonably useful. And now the "cheap" stuff has gotten into the performance ranges of the "performant" stuff from 2006, the year everyone stopped buying new computers every year because they didn't have to.
Today you have ChromeOS and Ubuntu Unity and Firefox OS and a number of interesting alternatives that are free or mostly so, and 64 bit ARM processors which sell for less than a 1/3 what the same performance 64 bit x86 processor sells for. And the collateral damage of that is you can put together a pretty capable unit for not a lot of money. Tether it to a $10 phone from Walmart and its really amazing.
I think I’ve been paying close to the same price for computers for 25 years. Moose’s Law and relentless miniaturization and cost optimization are the only reason why.
Common observation also : if you build a car from scratch using parts you'll end up with a much higher price. If a competitor builds a similar PC with the same sales volume, enabling the same bulk discount, the comparison would be valid.
PC manufacturers are incredibly cost sensitive right now. It is kind of like the airline industry where they strip away a $4 meal and $1 blanket on a $250 ticket to save money.
I completely agree. Another major factor the article missed is price.. you can buy a computer for $5 to $4000. Cars at at a much much higher range and therefore consumers have less desire to tinker / potentially break / buy new parts / upgrade / etc.
(Although, I do not know how expensive PCs were back in the day)
Prebuilt maybe have some nice margin, but I don't know any gamers who haven't bought their PC custom, or assembled by the retailer. Those have very thin margins, both component manufacturers and retailers have very stiff competition.
Consumer hardware engineering these days is all about getting away as close to the edge as possible. And that'd be fine, if there was an option for better margins at a higher price. But there isn't...
I've seen every computer part come down in cost over the years even after briefly becoming expensive through my life that recent trends have been odd to me.
True, but PC assembly vs black box computers spawned an entire industry and and have kept component prices low even for end consumers. I had to replace a hard disk recently and am still bemused by my ability to purchase a new server-grade 2TB drive for $125.
I keep hearing this but then think I saved 30% by building my own PC so it doesn't ring true. Also I would expect HP to get parts at least 10-20% cheaper than a consumer increasing this margin. And the time assembling is not that much to warrant additional costs. Maybe because I have a high end rig there are some margins here... but in this context it feels like there are decent margins there to me.
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