HP Alert: RAM now accounts for 35% of PC manufacturing costs, tightening industry margins

RAM memory has shifted from being a relatively “predictable” component in a computer’s bill of materials to a source of stress for the entire PC industry. HP has acknowledged in its latest earnings call that the cost of memory (amidst the accelerated increase in DRAM and, simultaneously, NAND prices) has risen to represent around 35% of the bill of materials (BOM) for their devices, compared to 15% to 18% in the previous quarter.

On its own, this figure is a warning sign for a market where margins are built on small adjustments per unit and supply chains are finely optimized. If a component like RAM doubles its share of total cost within months, the impact extends beyond accounting: it influences product decisions (configurations, ranges), inventory strategies, and potentially consumer prices.

The jump in a table: from “basic component” to main piece of the BOM

HP explained that this increase isn’t due to a momentary fluctuation but results from a “dynamic” environment with sustained cost pressures. Behind the scenes, the memory industry is experiencing a cycle where demand linked to AI infrastructure and data centers has strengthened pricing power for major suppliers, while the PC market faces more supply constraints.

Market context: record-breaking forecasted increases in DRAM and NAND

HP’s warnings align with the outlook from industry analysts. TrendForce has revised its forecast upward for the first quarter of 2026, raising its expected contractual price growth for “conventional” DRAM to a range of 90% – 95% quarter-over-quarter, up from more moderate earlier estimates. For NAND, similar significant increases are projected. The message is clear: device manufacturers aren’t just facing high prices but are operating in a “seller’s market”, with limited availability and tighter allocations.

For PC manufacturers, this dynamic presents a particular challenge: memory isn’t a marginal element. In a mid-range laptop, RAM and SSD configurations largely determine perceived value, so reducing capacity is a delicate decision. Yet absorbing the increased costs without adjusting prices might also be unviable.

What HP’s numbers reveal: sales growth, margin pressure

In its first fiscal quarter of 2026, HP reported $14.4 billion in revenue, up 6.9% year-over-year. The Personal Systems division reached $10.3 billion, with an 11% increase, driven by growth in both consumer and business units. However, despite this commercial traction, rising memory and component costs exert pressure on operating margins and complicate guidance.

HP maintained its full-year outlook but warned that it expects to be at the lower end of the range due to cost impacts and a more volatile operating environment. The company also provided guidance for the next fiscal quarter, within a framework where memory has become a structural “headwind.”

Table: HP FY2026 Q1 (key metrics)

Additionally, HP highlighted the growth of “AI-capable” PCs, a segment the industry uses as a lever to raise ASP (average selling price) and protect margins. However, the memory cost issue introduces a risk: if RAM and storage prices continue to climb, even premium ranges could absorb some of the impact.

HP’s response: supply agreements, inventory, rapid qualification, and AI-driven planning

The company outlined a set of measures combining disciplined procurement and operational adjustments:

• Long-term supply agreements to secure needs during the fiscal year.
• Strategic inventory for key platforms to buffer against disruptions.
• New suppliers and materials with a clear goal to halve qualification times to accelerate product configuration changes.
• Lower-cost sourcing in their component “basket” and logistics cost reduction via more agile “end-to-end” planning.
• Utilization of internal AI initiatives to optimize supply chain processes and planning.

The qualification process is especially relevant: in a market where memory prices are unpredictable, the ability to certify alternatives quickly offers a competitive advantage. While it doesn’t solve the global shortage, it can reduce exposure time to a single supplier or cost profile.

The next domino effect: consumer prices and configuration adjustments

HP has not announced an immediate widespread price increase but has hinted that adjustments might occur through selective pricing actions and product reconfigurations. In practice, this often involves three strategies: raising prices in certain ranges, prioritizing configurations with better margins, or revising memory options in entry-level models.

The PC industry doesn’t operate in a vacuum. When a major manufacturer openly states that memory now accounts for more than one-third of a device’s cost, it sends a clear message to the channel: the problem isn’t local. It’s a pressure that’s echoed across the market and might lead to more expensive or less well-equipped PCs, precisely when consumers expect the opposite.

Frequently Asked Questions

Why is RAM so expensive in 2026?
Because demand for memory in AI infrastructure and data centers is straining the global supply, increasing the pricing power of suppliers and driving record forecasted increases in DRAM.

What does it mean that RAM now makes up 35% of a PC’s cost?
It indicates that memory has become a dominant part of the BOM. This reduces margins for manufacturers and raises the likelihood of price or configuration adjustments.

How might this memory crisis affect HP laptops and retail prices?
The impact will likely be felt through “selective actions”: price hikes in certain models, configuration changes (such as prioritizing higher-margin ranges), and increased promotional volatility.

Can “hidden” factors still impact user experience?
Yes: if manufacturers cut memory in entry models or raise prices, users may notice differences in multitasking, battery life, and value, especially in configurations with limited RAM.

via: finance.yahoo