Home > Articles > Home & Office Computing

Searching for Substance: Hot Air Costs More Than Hardware

Why are PCs so expensive, if PC parts are cheap? Nigel McFarlane explains where the money goes, and suggests a better alternative: Leave the processing on the PC, and move everything else to the peripherals. Like your old-fashioned Hi-Fi (high fidelity) stereo system, a Di-Fi (digital fidelity) system gives you flexibility at a really reasonable price. The integration point for such a system is an open network, not a closed operating system.
Like this article? We recommend

Steve Ballmer of Microsoft fame recently said that "we" are in need of personal computers (PCs) that cost $100. Questions abound about that statement: Where should those 100 bucks be spent? What bits of Ballmer's suggested technology do we really need? And who are we required to kill before or after such a purchase event?

I suggest that "we" don't really need or even want a hundred-dollar PC that's of the traditional kind. Instead, a better way forward is applying new-style Digital Fidelity (Di-Fi) computing technology to the problem spaces traditionally occupied by PCs.

If you've ever tried connecting your digital camera, printer, and flash RAM keychain to your external USB hub for picture print and storage, you're a frontrunner in Digital Fidelity computing behavior. Like old-fashioned high-fidelity (Hi-Fi) systems consisting of radio tuners, amplifiers, and turntables, Di-Fi is about lots of hardware pieces that you can mix and match as you go—without opening your PC's case. Where Hi-Fi was all analog, however, Di-Fi is all digital.

You might be surprised to learn that there's more value overall in such a piece-wise architecture than in a super-cheap shrink-wrapped PC "with everything."

Why PCs Are So Expensive

Overall, traditional PCs are very confusing in terms of price. The cheapest PC I know of is the Xbox, which hovers around $250 retail. It's a PC in a fancy case, with Microsoft Windows inside and a couple of hand controls. If you subtract the cost of the Windows software, you'd be lucky to have $1 left for the hardware. Clearly, PC parts are very cheap for manufacturers, but not so for the general public. Purchase a PC either ready-built or in pieces, and you'll have little change out of $1,000. And yet, PC parts are supposedly commodity items. Something is clearly wrong.

Once it's purchased, the value you derive from a traditional PC is not so high, either. If you use it to write your Harry Potter knockoff, perhaps that's different, but as a piece of consumer electronics, PCs provide fairly poor value. They're supposed to be "instant on" and "always on," but I've yet to experience that convenience (at least, not the way Star Trek portrays it). The PC you get will sound like a truck and glow like a radiator. It will pump out hot air like there's no tomorrow. The obscure and black art of building quiet PCs—a task not for the timid—is of no help for mere humans, and expensive laptops provide the only real escape route.

Why is it that Microsoft and friends can assemble very cheap PCs and no one else can? It's not as though any of the parts are especially unique. It's not as though PC parts are made in Switzerland, where labor costs are scary and confusing. In fact, there are two reasons for the high cost of today's PC: For the first reason, welcome to the horrid world of container-shipped distribution networks. The second reason has to do with distorted free markets.

Markup and Shipping

Suppose you're a retailer and want to sell an Asian-made keyboard in the West for $10. Here are your business realities. It could cost $50 to fly the keyboard in with a courier, so that won't work. You'll have to do it the cheap way: Work with distributors and pack full a 20-foot-long seagoing container. That's 7,500 keyboards per container, or else pay more to share the space. It's a significant purchase commitment.

If you're accustomed to bickering over prices at swap meets or flea markets, you might be shocked to learn how the supply chain takes the risk out of such large orders. In the country of origin, the remote distributor might take a 60% markup to process the goods. In the destination country, the local distributor might do the same.


For a fast education in the financial witch's brew that is shipping logistics, read this page on the Indonesia Bali Export Products site. I promise, you'll find it interesting.

As a callow youth working in toy stores and department stores, and as a harried adult doing occasional business in the gift industry, I can report that if a retailer discounts small items below a further 100% markup, then it's good weather for snowboarding in Hell. Total markup for a sadly ordinary case involving two distributors and a retailer: (1.6 × 1.6 × 2) - 1) = 4.12, or 412% markup. Finally, there are the shipping costs: an additional $120 per cubic meter (11 cubic feet) of goods if you're moderately well-organized. Try a web site like this one to compare prices. If you measure your keyboard for container volume and apply a range of shipping costs (go ahead), you'll find that up to 25% of that $10 keyboard purchase is due to shipping costs alone.

All of this processing is very exploitative. The shipping company gets only 12 cents. The manufacturer gets $1.40 at the outside. The consumer gets a piece of equipment whose factory-door value might be only 50 cents. There's not much in it for anyone. And it's not much of a business shipping a box of almost nothing around the world. It sounds pointless, doesn't it? No wonder keyboards are despised by our stall-holder friends at computer swap meets. And we don't even get them for 50 cents.

Using the same analysis, it transpires that up to 40% of the retail cost of a CRT monitor is lost to shipping. No wonder manufacturers are enthusiastic about modern thin-screen monitors. CRTs are big and chunky; thin screens pack together very well—cheaper to ship. Worst of all, a PC case can have 75% of its retail value tied up in shipping costs. That's not much money left for the case itself.

So the first problem with traditional PCs is cost-to-market. A prebuilt Xbox saves shipping, but is a closed proposition. A custom-built and extensible box is price-inflated, because of the expensive tour that the pieces took around the world on their way to you. In neither case is the consumer or the manufacturer particularly happy, because a great deal of the retail price went to the middlemen (Microsoft and distributors).

Retail price is a cold way to assess value, too. If I buy a $50 PC case, I'd rather it be one where less than $37.50 (75%) of the $50 was spent wrecking the environment with diesel shipping. I wanted a PC case, not a mortal sin. If I buy an Xbox for $250, I'd like to think that there's at least $50 of actual componentry inside. Call me a hopeful pessimist.

Why We Put Up with It

The royal "we" know why consumers put up with such waste: We're occasionally brilliant, but more usually confused. But why do manufacturers put up with such waste? It doesn't sound like the value-adding litany of modern business to me. Why do they churn out keyboards full of nothing, worth nothing?

The reason can only be that there is a sense of paralysis. The existing PC architecture is not something that a hardware manufacturer can afford to mess with very much. If integrators, distributors, or operating system vendors drop a manufacturer's hardware from the compatibility list, it's a business disaster. It's easier to put up with shipping costs, and have your business survive. Windows is the primary integration point for most PC hardware, and you have to fit in or perish. Once you finish trading licensing agreements with chip makers, patent holders, and proprietary standards consortia, you might still have a compatibility audit with Microsoft to get through. The 50 cents your keyboard is worth is probably nearly gone.

Shipping costs and complex business environments are not good for consumers. They're not good for hardware manufacturers, either. There's no solution while Windows sits in the middle like a fat toad, as the sole integration point.

And that's where Di-Fi comes in.

InformIT Promotional Mailings & Special Offers

I would like to receive exclusive offers and hear about products from InformIT and its family of brands. I can unsubscribe at any time.


Pearson Education, Inc., 221 River Street, Hoboken, New Jersey 07030, (Pearson) presents this site to provide information about products and services that can be purchased through this site.

This privacy notice provides an overview of our commitment to privacy and describes how we collect, protect, use and share personal information collected through this site. Please note that other Pearson websites and online products and services have their own separate privacy policies.

Collection and Use of Information

To conduct business and deliver products and services, Pearson collects and uses personal information in several ways in connection with this site, including:

Questions and Inquiries

For inquiries and questions, we collect the inquiry or question, together with name, contact details (email address, phone number and mailing address) and any other additional information voluntarily submitted to us through a Contact Us form or an email. We use this information to address the inquiry and respond to the question.

Online Store

For orders and purchases placed through our online store on this site, we collect order details, name, institution name and address (if applicable), email address, phone number, shipping and billing addresses, credit/debit card information, shipping options and any instructions. We use this information to complete transactions, fulfill orders, communicate with individuals placing orders or visiting the online store, and for related purposes.


Pearson may offer opportunities to provide feedback or participate in surveys, including surveys evaluating Pearson products, services or sites. Participation is voluntary. Pearson collects information requested in the survey questions and uses the information to evaluate, support, maintain and improve products, services or sites, develop new products and services, conduct educational research and for other purposes specified in the survey.

Contests and Drawings

Occasionally, we may sponsor a contest or drawing. Participation is optional. Pearson collects name, contact information and other information specified on the entry form for the contest or drawing to conduct the contest or drawing. Pearson may collect additional personal information from the winners of a contest or drawing in order to award the prize and for tax reporting purposes, as required by law.


If you have elected to receive email newsletters or promotional mailings and special offers but want to unsubscribe, simply email information@informit.com.

Service Announcements

On rare occasions it is necessary to send out a strictly service related announcement. For instance, if our service is temporarily suspended for maintenance we might send users an email. Generally, users may not opt-out of these communications, though they can deactivate their account information. However, these communications are not promotional in nature.

Customer Service

We communicate with users on a regular basis to provide requested services and in regard to issues relating to their account we reply via email or phone in accordance with the users' wishes when a user submits their information through our Contact Us form.

Other Collection and Use of Information

Application and System Logs

Pearson automatically collects log data to help ensure the delivery, availability and security of this site. Log data may include technical information about how a user or visitor connected to this site, such as browser type, type of computer/device, operating system, internet service provider and IP address. We use this information for support purposes and to monitor the health of the site, identify problems, improve service, detect unauthorized access and fraudulent activity, prevent and respond to security incidents and appropriately scale computing resources.

Web Analytics

Pearson may use third party web trend analytical services, including Google Analytics, to collect visitor information, such as IP addresses, browser types, referring pages, pages visited and time spent on a particular site. While these analytical services collect and report information on an anonymous basis, they may use cookies to gather web trend information. The information gathered may enable Pearson (but not the third party web trend services) to link information with application and system log data. Pearson uses this information for system administration and to identify problems, improve service, detect unauthorized access and fraudulent activity, prevent and respond to security incidents, appropriately scale computing resources and otherwise support and deliver this site and its services.

Cookies and Related Technologies

This site uses cookies and similar technologies to personalize content, measure traffic patterns, control security, track use and access of information on this site, and provide interest-based messages and advertising. Users can manage and block the use of cookies through their browser. Disabling or blocking certain cookies may limit the functionality of this site.

Do Not Track

This site currently does not respond to Do Not Track signals.


Pearson uses appropriate physical, administrative and technical security measures to protect personal information from unauthorized access, use and disclosure.


This site is not directed to children under the age of 13.


Pearson may send or direct marketing communications to users, provided that

  • Pearson will not use personal information collected or processed as a K-12 school service provider for the purpose of directed or targeted advertising.
  • Such marketing is consistent with applicable law and Pearson's legal obligations.
  • Pearson will not knowingly direct or send marketing communications to an individual who has expressed a preference not to receive marketing.
  • Where required by applicable law, express or implied consent to marketing exists and has not been withdrawn.

Pearson may provide personal information to a third party service provider on a restricted basis to provide marketing solely on behalf of Pearson or an affiliate or customer for whom Pearson is a service provider. Marketing preferences may be changed at any time.

Correcting/Updating Personal Information

If a user's personally identifiable information changes (such as your postal address or email address), we provide a way to correct or update that user's personal data provided to us. This can be done on the Account page. If a user no longer desires our service and desires to delete his or her account, please contact us at customer-service@informit.com and we will process the deletion of a user's account.


Users can always make an informed choice as to whether they should proceed with certain services offered by InformIT. If you choose to remove yourself from our mailing list(s) simply visit the following page and uncheck any communication you no longer want to receive: www.informit.com/u.aspx.

Sale of Personal Information

Pearson does not rent or sell personal information in exchange for any payment of money.

While Pearson does not sell personal information, as defined in Nevada law, Nevada residents may email a request for no sale of their personal information to NevadaDesignatedRequest@pearson.com.

Supplemental Privacy Statement for California Residents

California residents should read our Supplemental privacy statement for California residents in conjunction with this Privacy Notice. The Supplemental privacy statement for California residents explains Pearson's commitment to comply with California law and applies to personal information of California residents collected in connection with this site and the Services.

Sharing and Disclosure

Pearson may disclose personal information, as follows:

  • As required by law.
  • With the consent of the individual (or their parent, if the individual is a minor)
  • In response to a subpoena, court order or legal process, to the extent permitted or required by law
  • To protect the security and safety of individuals, data, assets and systems, consistent with applicable law
  • In connection the sale, joint venture or other transfer of some or all of its company or assets, subject to the provisions of this Privacy Notice
  • To investigate or address actual or suspected fraud or other illegal activities
  • To exercise its legal rights, including enforcement of the Terms of Use for this site or another contract
  • To affiliated Pearson companies and other companies and organizations who perform work for Pearson and are obligated to protect the privacy of personal information consistent with this Privacy Notice
  • To a school, organization, company or government agency, where Pearson collects or processes the personal information in a school setting or on behalf of such organization, company or government agency.


This web site contains links to other sites. Please be aware that we are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of each and every web site that collects Personal Information. This privacy statement applies solely to information collected by this web site.

Requests and Contact

Please contact us about this Privacy Notice or if you have any requests or questions relating to the privacy of your personal information.

Changes to this Privacy Notice

We may revise this Privacy Notice through an updated posting. We will identify the effective date of the revision in the posting. Often, updates are made to provide greater clarity or to comply with changes in regulatory requirements. If the updates involve material changes to the collection, protection, use or disclosure of Personal Information, Pearson will provide notice of the change through a conspicuous notice on this site or other appropriate way. Continued use of the site after the effective date of a posted revision evidences acceptance. Please contact us if you have questions or concerns about the Privacy Notice or any objection to any revisions.

Last Update: November 17, 2020