Taiwan-based notebook ODMs may not benefit much from the Ultrabook platform, despite downstream branding partners mostly being optimistic about the new device, according to sources from upstream component suppliers.

The sources pointed out that due to the custom-made ultra-thin components having higher costs than standard ones, each Ultrabook can only contribute an average profit of US$5-10 to notebook ODMS, 50% lower than the average of US$10-20 for traditional notebooks.

Since Ultrabook is mainly pushing its ultra-thin design with a thickness of only less than 0.8-inch, it requires the adoption of an unibody magnesium-aluminum alloy chassis, which is priced 5-7 fold higher than the traditional plastic chassis, while hollow hinges used in Ultrabooks are also 3-5 fold more expensive than traditional hinges, significantly reducing ODM's profitability from Ultrabooks.

However, the high component costs may have a chance to improve after shipments started to increase in 2012 since the current high cost is mainly due to limited shipments.

With notebook ODMs already suffering from low gross margins, while labor costs from China are rising and demand from Europe and the US are slowing down, the ODMs are likely to see their gross margin to continue dropping in the future. 

Source:digitimes