RAM Costs Soar, Now 35% of HP PC Build Expenses
▼ Summary
– HP’s CFO stated that RAM’s cost share in PC manufacturing has surged from 15-18% to about 35% due to severe memory shortages.
– HP forecasts a double-digit decline in its Personal Systems market this year, as higher component costs reduce customer demand.
– Memory costs have increased by roughly 100% sequentially and are forecast to rise further throughout HP’s fiscal year 2026.
– The company expects the financial impact of the RAM shortage to be most severe in the second half of its fiscal year 2026.
– HP has raised PC prices to maintain margins, and leadership expects price volatility for DRAM and NAND to continue into fiscal year 2027.
The cost of memory components has become a significant driver of overall PC manufacturing expenses, with recent market dynamics leading to a dramatic shift. HP Inc. has revealed that the proportion of a PC’s bill of materials attributed to RAM has surged from a historical range of 15 to 18 percent to approximately 35 percent for the remainder of its fiscal year. This sharp increase highlights the severe pressure memory shortages are placing on the entire industry, directly impacting product pricing and corporate financial forecasts.
During a recent earnings discussion, HP’s Chief Financial Officer, Karen Parkhill, detailed the challenging environment. She noted that memory costs have escalated by roughly one hundred percent from the previous quarter, with expectations for further increases as the fiscal year progresses. This substantial rise in a core component is forcing difficult decisions across the business. The company anticipates the total addressable market for its Personal Systems division to contract by double digits this calendar year, as higher final prices inevitably dampen consumer and commercial demand.
The financial impact is expected to be most acute in the second half of HP’s fiscal period. Company leadership, including interim CEO Bruce Broussard, pointed to rising prices for both DRAM and NAND flash memory as the primary culprits behind increased input costs. The volatility in the memory market is not seen as a short-term issue; executives forecast that these challenging conditions will persist throughout the current fiscal year and likely extend into the next. This outlook suggests a prolonged period of adjustment for manufacturers and consumers alike.
In response to these margin pressures, HP is implementing several strategies. Parkhill indicated that about a third of the margin for the Personal Systems unit is derived from categories not tied to RAM, such as IT services and peripheral devices. However, to maintain profitability in the face of soaring memory expenses, the company has also been compelled to increase the prices of its personal computers. This move, while necessary from a business standpoint, contributes to the market contraction by making devices less affordable. The situation underscores a broader industry challenge where component shortages and price inflation are reshaping product economics and consumer accessibility.
(Source: Ars Technica)
