Entry-level laptop from Dell - lowest possible configuration - 1.3MHz Celeron, 256MB DRAM, 30GB HDD, DVD-ROM/CD-RW, IDE/ATAPI, 24X Optical Drive, Modem, 14.1" XGA Display, NO 802.11b/g.
$499 (post-rebate) entry-level laptop from Dell. This laptop, for the US market at least, represents the benchmark for inexpensive laptops. Oddly - this configuration is beneath what is currently being offered on the US Dell website. You cannot purchase, for example, this configuration online today on the Dell website - 40GB minimum now (vs 30GB in this analysis) with 1.4GHz processor (1.3GHz in this analysis) and free wireless card (not included in this analysis).
The Inspiron is one of Dell's two Notebook PC product lines: Latitude and Inspiron. The Inspiron line is aimed at consumers and small-office home-office (SoHo) customers, and is characterized by Dell as offering performance at aggressive prices. The Latitude range is Dell's business Notebook platform, targeted at all sizes of businesses.
Although we can trace the roots of the Inspiron as far back as 1998, we could not find the exact date of release of this particular Inspiron model.
The Inspiron 1200 is currently available in North America, and it is also available on the French Dell website. In the UK we assume the model is recently discontinued, as hyperlinks to the model still exist on www.dell.co.uk but result in error pages. We find no evidence of 1200 availability in Asia Pacific.
We are using the estimate of 1M units for lifetime production. This assumption is derived from our research in the PC area: iSuppli estimates that Dell will ship a total of 10 to 11 Million laptop / notebook computer units in 2005, and that of that about one quarter of the notebook volume sold by Dell will be consumer laptops. Furthermore, of that approximate 2.5M units of production, we estimate that roughly one third of that product range are entry level Inspiron notebooks, such as this model 1200 - which brings us to our assumption of approximately 1 Million units.
As a reminder, volume production assumptions primarily affect our cost analysis in terms of amortized NRE and tooling costs, especially for custom components specific to the model being analyzed (mechanical components especially). Furthermore - this volume assumption only directly affects plastics, metals, and custom mechanical components which would be common to all Inspiron 1200 notebooks, regardless of configuration.
Market Shares / Sector Performance
In iSuppli's Q2 2005 PC Market Share, Dell was ranked the number 1 Notebook PC vendor, with shipments of 2.4 million units. Dell's Q2 2005 Notebook PC market share shipments illustrated year-over growth of 31 percent. In Q2 2005, Dell had a market share of 18.6 percent of the Notebook PC market. The next nearest Notebook PC competitor was Hewlett-Packard, ranked 2nd, with a market share of 17.1 percent.
In Q2 2005, Dell's Notebook PC shipments accounted for 27 percent of the companies PC shipments (covering Desktop PCs, Notebook PCs, and Entry-Level Servers).
In 2004, Dell was ranked the number 1 Notebook PC vendor, with a market share of 17.4 percent, on unit shipments of 7.9 million.
Throughout our history of performing cost analyses on systems and devices, we are often stumped as to how it is possible that certain devices have so much cost built into them, we find it difficult to understand how it is possible to build such devices profitably. This is one of those devices.
ISuppli teardown analyses involve the complete deconstruction of the device after which we consult various internal analysts to ascertain the latest in market pricing not just for assemblies such as the display, hard drive, and optical drive, but for the microprocessor, DRAM, flash and various integrated circuits. In all cases we strive to fully account for Dell leverage and therefore are targeting the low end of the cost spectrum for all components. Despite our aggressive assumptions, we are a little surprised that a device that retails for $499 would have a materials and very basic manufacturing costs of approximately $437.
We have reviewed every lineitem to make sure that we have the latest market information, and are making the most cost-aggressive assumptions - and still we are mystified that this device should have such high costs. Furthermore, beyond the scope of this teardown analysis, and unaccounted for here are the packaging and literature (only a few dollars more), software licensing fees, Dell intellectual property of any kind, logistics costs beyond that of the manufacture of the device itself, ODM margin and Dell margin.
We believe that Dell may, in fact, be "giving away" such a baseline notebook configuration in order to "make up" their margins on all of the online add-ons that Dell are famous for offering on their website - memory, printers, service contracts and even now mp3 players or cameras.
Furthermore, we would be hard pressed to find much more "fat" in this analysis with respect to component and systems costs from which we could "deflate" the assumed costs and create a feasible "higher margin" scenario for Dell. In fact, for many components we feel that the costs may be overly aggressive and we may be over-assuming Dell's purchasing leverage. Also - it is interesting to note that display panel pricing has been on the rise of late.
Other costs (or offsets) that are not included here would include fees paid to Dell by Intel or AOL to promote their products / services through the "Intel Inside" campaign, for example, or the classic AOL starter kit included. Such things may help offset some costs.
And lastly - this model is typically sold for $549 with a $50 rebate. Clearly, Dell is also playing the numbers in this respect - and probably signifcantly elevates the average selling price of this laptop in this manner.
Laptop costs are largely feature driven, but also driven by general manufacturing complexity, design for manufacturing (or DFM), component counts and of course the country where they are assembled. This is a relatively simple laptop - but as with all laptops there is an inherent mechanical complexity involved with a numerous mechanical components relatively high hand assembly times. However, because of the famously low Chinese labor rates, and generally low cost structure - hand assembly is generally the least expensive assembly cost element.
Main Cost Drivers (Representing 88% of total materials costs):
14.1" TFT Display - Samsung ~$121
Motherboard (Minus processor)* ~$99
Intel 1.3GHz Celeron Processor ~$65
Hitachi 30GB, 4200RPM, 2.5", ATA HDD~$48
Philips DVD-ROM/CD-RW, IDE/ATAPI, 24X~$41
Subtotal Main Cost Drivers~$374
Total Materials Costs~$426
Manufacturing and Materials** ~$437
* - Direct materials costs only (manufacturing not considered on this reference cost).
** - The total materials and manufacturing costs reported in this analysis reflect only the direct materials cost (from component vendors and assorted EMS providers), manufacturing and test. Not included in this analysis are costs above and beyond the manufacture of the core device itself - cost of software, licensing fees (system level), shipping, logistics, marketing and other channel costs including not only the OEM's margin, but that of other resellers. Our cost analysis is meant to focus on those costs incurred in the manufacture of the core device, as well as any accessories supplied with the laptop itself (here power supply and battery only).
Country of Origin / ODM or EMS provider
This laptop is manufactured in China, per labels on the notebook, and we are assuming that this country of origin also applies to the manufacture of custom components (mechanical components - plastics, metals, and other), as well as the automated assembly of the printed circuit board assembly.
This assumption does not apply to systems purchased "as a unit" - as in - the display module, hard drive, optical drive, modem board, power supply, battery, and keyboard assembly. These are assumed to be purchased, fully assembled and tested from vendors at a negotiated unit price. Country of origin is considered in many of these cases when estimating the unit price - but the labor rates stated in our assumptions here only apply to those systems (Main PCB, and final assembly of laptop) where we build the cost from the "ground-up'.
The ODM is not known to us - however we are assuming that either Compal or Quanta are working with Dell to provide this model.
Design for Manufacturing / Complexity
We calculate manufacturing costs from the ground-up by separating all components and sub-systems into two categories - those components which are hand assembled or inserted, and those which are automatically inserted in a "pick and place" manufacturing environment. Typically most electronic components on PCBs are "auto" inserted, and typically most final assembly of products involves majoritarily "hand" assembled products. We categorize every component and system in this way in our spreadsheet BOM analysis.
Then, depending on the type of component, we either allocate a line item per component "auto" insertion cost (computer modeled), or estimate a cycle time (in seconds) per component for the hand assembly or insertion of that component or system into the next level of assembly. Cycle times are estimated based on overall complexity, and the total of those cycle times is logically, therefore, also a direct function of the number of components being inserted.
- Samsung - LTN141XB - 14.1" - XGA - 262K Color
- Intel - RH80536xxxxxxxSL86L - Intel Celeron M Processor 350 - 1.30 GHz/1MB Cache/400MHz Front Side Bus
- SMSC - EMC6N300-CK - Fan Control and Hardware Monitoring
I/0 & Interface
- Foxconn - Modem Card - Fax/Modem Data - Conexant Chipset
- Texas Instruments - PCI1510GVF - PC Card Controller
- Intel - EP82562GT - LAN Connect - 10/100 Mbps Platform
- Sigmatel - STAC9752AT - Audio Codec
- Promos Technologies - V58C2256164SCT6 - SDRAM - DDR, 256Mbits (x8)
- Macronix - MX29LV008BBTC-70 - NOR Flash - 8Mb, 70ns
Northbridge / Graphics - Mobile Intel Chipset
- Intel - NQ82910GMLSL8G5 - Processor/Memory Support & Power Management
Southbridge / Keyboard Control
- Intel - FW82801FBMSL7W6 - I/O Controller Hub
- SMSC - LPC47N354-AAQ - Microcontroller - Keyboard
- Hitachi - HTS424030M9AT00 - 30GB, 4200RPM, 2.5", ATA/IDE
- Philips - SCB5265 - DVD-ROM/CD-RW, IDE/ATAPI, 24X