Separate from the increase in LCD monitor panel pricing is a new variable in OEM assembly for desktop monitors and notebooks. OEM contract manufacturers are now pushing to raise their pricing to major brands, citing increases in costs associated with logistics, materials and labor. In the past, OEMs might have just bid a monitor-build project based upon fixed LOP (labor, overhead and profit) rates, even though these rates can vary greatly depending on such variables as the cost of oil for shipping. The rising cost of oil also impacts components manufactured from oil, such as plastics; according to the Quarterly LCD Monitor Cost and Price Forecast Model, the plastic components of an LCD monitor can account for 4-5% of a total monitorâ€™s FOB price.
Perhaps the most important aspect of LOP is the increase in labor costs incurred in 2010 but not yet passed along to brands. Foxconn (Hon Hai) significantly increased workerâ€™s wages in 2010 in some part due to negative press on their labor conditions. Most major Taiwanese OEMs followed Foxconn in increasing worker compensation in order to remain competitive and to keep workers. The result of this increase in labor cost is now likely to flow to end-markets through brands.
With raw materials and labor costs increasing combined with the weakening of the dollar, high-tech goods including LCD monitors coming out of China will eventually cost more, a lot more, in the US. It will be interesting to see Apple continue to maintain its unbelievably low starting price on its current and future iPads.