Dell Update: Hardware Lead Times and Price Premium

Dell has somehow managed to navigate the global supply chain shortage of semiconductors and logistical challenges in a manner unmatched by its competition in the PC and infrastructure equipment markets. This distinction was trumpeted by Dell Co-Chief Operating Officer Jeff Clarke, who noted on the company’s Q4 earnings call, “Our supply chain continues to be a durable competitive advantage.” In a commodity market, competitive advantages are difficult to come by.


One client ran an RFP between Dell, HP, and Lenovo for their enterprise PC environment in early 2021, for 15,000 devices. Both HP and Lenovo quoted lead times of 12 to 16 weeks, while Dell promised delivery times of less than 4 weeks. For context, the industry average lead time prior to the component shortage was 3 to 4 weeks.


Another client reported that Dell had recently delivered a large purchase order of x86 servers within 4 weeks. In comparable deals with HPE and Cisco, clients have experienced lead times that span between 20 and 30 weeks.


Although Dell has been able to circumvent many of the supply-side issues that have plagued its rivals, its pricing has significantly increased. The market average price increase for PCs has been between 5% and 15%, while pricing for Dell’s Latitude laptops have commanded the highest observed increase at 40%. On the infrastructure gear side, Dell servers are now 15% to 30% more expensive than they were in August 2021, while dedicated storage solutions have been in the 5% to 10% range over the same time period. It should be noted that these increases are in line with other leading hardware OEMs, while Cisco – with lead times for some server parts exceeding 6 months – also had the industry’s highest observed price increases on servers.


Customers may find the price increases a bitter pill to swallow, with Dell reporting record high revenues in their latest earnings call. However, the company claims that it is currently paying significantly more for components of late and must adjust the product pricing accordingly. Dell sales reps have indicated that price increases will likely continue throughout 2022 due to rising oil prices, increased logistical costs, and the expected cost increase coming on several commodities (including NAND flash-memory pricing, following the recent contamination at Kioxa and Western Digital production facilities; researchers at TrendForce forecasts that NAND flash pricing could soon spike by 5% to 10% as a result of the contamination.)


The Takeaway


Dell’s robust supply chain has allowed its customers to enjoy normal delivery times despite industry-wide constraints that are expected to impact sourcing and procurement teams well into 2023. That said, Dell’s prices continue to increase in each category (end user equipment and infrastructure gear), forcing buyers to be especially diligent with forecasting their hardware needs and budget numbers for the foreseeable future.


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- Patrick Wareham is an Senior Analyst at Accenture.