Why Microsoft is raising laptop prices as Apple makes productivity cheaper

Apple’s $599 MacBook Neo arrives just as laptop makers are making productivity more expensive. Microsoft raised prices on its Surface line this week, and other PC makers are under pressure from the rising costs of memory, storage and even Intel processors. Apple is going the other direction, offering a cheaper laptop that still promises sufficient performance for the work most people do every day.

The MacBook Neo zigzags where Apple normally zigzags: instead of shipping a high-end product at a high price, Apple stole a page from budget PC sellers and started cutting corners to save money. The MacBook Neo’s A18 Pro phone processor is simply closer to a Chromebook, but with the branding and performance of a more expensive device.

But this price gap doesn’t just reflect marketing. Analysts said PCWorld that Apple can reduce productivity by controlling more of the product stack, from chip design to hardware integration, giving it flexibility that Microsoft and other PC makers simply don’t have. The result is the MacBook Neo: a laptop designed to do more with less, at a time when the rest of the PC market charges more for the same basic promise.

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PC performance at a fraction of the price

Honestly, Microsoft’s Surface line may not be the best comparison to Apple’s laptop.

“If you think of the Neo as a high-end Chromebook system, it makes a lot more sense. Surfaces are not in the same category,” Dean McCarron, an analyst at Mercury Research, said by email.

“It’s pretty easy to see how Apple reached the lowest price point,” McCarron continued. “Chromebooks are also more expensive now, but the median price is around $500 for [an Intel] N100/N150 [Chromebook processor] and $370 for a Mediatek-based system; upgrade the RAM, SSD and display and you’re at Neo levels in specs and price. Surface prices vary widely due to options, but the median is around $1,500.

For chips alone, an N100/150 typically costs less than $35 “and can even be half that price,” McCarron said. The Surface’s Qualcomm Snapdragon

Michael Crider / Foundry

There is more. Since Apple designed and fielded the A18 Pro itself, it can save money on each individual chip. Chipmakers like Apple pay for individual silicon costs, although the amount is unclear; it depends on the actual size of the chip and the process technology used.

It’s unclear whether Apple actually paid for “extra” A18 Pro chips to make the Neo, or whether it was part of a stock it purchased but never used. Regardless, it has already been bought and paid for. Ben Thompson’s Stratechery (quoted here) even speculates that Apple could use “boxed” or discarded chips inside the Neo, essentially making them free!

The gap widens when performance is taken into account. In Geekbench 6, the MacBook Neo A18 Pro produced a score of 3,574, more than three times faster than the 1,125 produced by the N150, according to Macworld’s MacBook Neo review and research from CPU-Monkey.com. Single-threaded CPU scores determine how quickly the operating system runs, as well as many applications. And that’s still faster than the Core Ultra X9 388H (Panther Lake) single-core Geekbench score of 2,908 published in our Panther Lake review.

Apple’s own design process also benefits them. PC manufacturers have always oscillated between two business models: vertical integration and the “just-in-time” model. There’s a reason Dell became such a powerhouse so quickly. He developed the ability to purchase and assemble components, then ship them almost immediately as finished PCs. This can be a bonus in an era where tokens are plentiful and cheap. In times of shortage, vertical integration – in which you not only assemble the components, but design and manufacture as many as possible – can be extremely practical, because a PC maker can know how many components are available, their prices, and when they will arrive. Apple probably knows how much each processor will cost, down to the penny.

This is what Jim McGregor, an analyst at Tirias Research, attributes to the low price of the MacBook Neo. “Apple pretty much controls the entire vertical stack, so they have a little more flexibility,” he said.

“Because they control the entire product stack, they currently have more pricing leverage than anyone else in the industry,” McGregor added.

Microsoft, on the other hand, simply does what most other PC makers do: it assembles third-party components into a laptop. For a brief period, Microsoft co-developed the SQ3 chip with Qualcomm for the Surface Pro 9 (5G) in 2022, but those days are long gone. Microsoft has to negotiate with processor and component suppliers like any other PC maker, and since it’s no longer one of the major PC makers, it’s probably suffering as much, if not more, than any other.

Do more with less

You now know that memory prices have more than doubled since last year. The MacBook Neo only includes 8GB of RAM. Yes, the “minimum” specs for Windows 11 are only 4GB, but virtually all Windows laptops use at least 8GB, and most of those hitting our desktop include 16GB total.

It appears that the A18 Pro uses low-power DDR5X memory. No one knows how much Apple or other PC makers pay for memory, but the price of 16GB of DDR5 memory has quadrupled from around $100 to more than $400 since last October. This hurts Microsoft and other PC makers much more than it hurts Apple. (Microsoft confirmed it was raising prices due to soaring memory and storage prices.)

Likewise, the MacBook Neo includes 256GB of SSD storage. Here, Apple is likely subject to the same forces as Microsoft, since it is forced to purchase SSDs from third parties. Microsoft’s cheapest 13-inch Surface Laptop also includes 256GB, so there’s no advantage here either.

“Given the supply issues, Apple’s timing is very good and they will likely get respectable margins over the cost of the hardware, which has been a problem for Chromebooks due to (previously) lower prices,” McCarron said. “Ultimately, the Neo is priced lower simply because the costs are much lower than conventional laptops, including the Surface.”

Reach the target market

Economists describe the current economic landscape as a “K”-shaped market: the poor are getting poorer, with less disposable income; the rich get richer. This means that over time, more and more manufacturers raise their prices to chase away wealthier customers. That’s what some blame for the shift away from economy cars, for example, or the continued rise in hotel room rates in Las Vegas.

Tirias analyst McGregor said some of the excuses in the PC market were essentially a smokescreen.

“The vast majority of the industry is trying to take advantage of this opportunity to raise prices, although many of them blame this on memory prices,” McGregor said. “Quite honestly, AMD, Intel, almost everyone is taking advantage, saying we’re going to raise prices because we know there’s going to be limited capacity, limited units, limited production, so… we’re going to just focus on the high end of the market.”

Mark Hachman/Foundry

As for Microsoft, “they view their competition as Apple, period, and they want to go after Apple, and Apple’s biggest margins are in its premium segment,” McGregor said.

At one time, Microsoft considered taking on the low-end Chromebook market, with devices like the Surface Laptop Go and Surface Go, as well as their various iterations like the Surface Laptop Go 3. But those devices quietly disappeared around the time former Surface chief Panos Panay left for Amazon. Now, Surface integrates the standard for Windows on Arm, driven exclusively by Qualcomm in recent years. This could change.

Still, McGregor also thinks the MacBook Neo could end up being a warning shot to potential competitors. Although nothing has been announced, Nvidia’s N1X Arm processor is expected to debut this year, possibly at the Computex show in Taiwan in June.

“So I think it’s also kind of a preemptive strike, if you will, to say we’re going to make sure that if you know of another solution that’s compatible or based on Arm, we’re still going to beat it,” McGregor said.