The Wall Street Journal (WSJ) has an excellent article on the rise of netbooks:
A new breed of low-priced laptops called netbooks have been thriving during the downturn -- so well, in fact, that many high-tech companies are scrambling to adapt.
The responses by these high-tech companies will be a hot topic at this week's Consumer Electronics Show. They include not only new netbooks -- which typically cost $300 to $500, and often use Intel Corp.'s Atom chip -- but products that address shortcomings of the new category and other portable PCs.
Netbooks, for example, tend not to be very good at displaying graphics and playing videos. So Hewlett-Packard Co., for example, on Tuesday introduced a $699 laptop that beefs up those capabilities with chips from Advanced Micro Devices Inc. H-P's new dv2 model is less than one inch thick and offers many features found in higher-end products such as Apple Inc.'s MacBook Air, which starts at $1,800.
Hewlett-Packard
Hewlett-Packard's thin new dv2 has features of high-end laptops but a price closer to low-end netbooks
Another problem with netbooks, and other laptops, is that they tend to start up too slowly and run out of power too quickly. Phoenix Technologies Ltd. is trying to address those issues with a downloadable layer of software, called HyperSpace, that lets users do simple chores such as calling up Web sites without waiting for an operating system to boot up.
The activity is the latest sign that technology segments are converging at an accelerating rate, driven by competitive pressures that the recession is amplifying. Companies including Phoenix are trying to help netbooks and other portables work as simply as cellphones, just as makers of those pocket-size devices are improving their ability to tap into the Web.
In another tactic, Qualcomm Inc. and Freescale Semiconductor Inc., which make chips for cellphones, are discussing plans at CES to offer their technology for netbooks, too. Henri Richard, Freescale's senior vice president and chief marketing officer, predicts that new entrants such as cellphone makers will join the race to make portable computers. "Netbooks change the paradigm for how you enter the computing space," Mr. Richard says.
The new products, sometimes called mini-notebooks, were exemplified by the success of the Eee PC that Taiwan's Asustek Computer Inc. introduced in 2007. Its initial models started at $299, had a seven-inch screen, used Linux rather than Windows and had no disk drive. The portables stored a small amount of data on flash memory chips.
Since then, companies such as H-P, Dell Inc. and Acer Inc. have introduced machines with a range of features, including larger screens, disk drives and Microsoft Corp.'s Windows XP software.
One of the biggest cheerleaders has been Intel, which helped popularize the term netbooks and this past spring introduced the low-priced Atom chip as a calculating engine for the new devices. "Suffice it to say, demand turned out to be much larger than we anticipated," says Bill Calder, an Intel spokesman.
Gartner analyst Mika Kitagawa estimates that more than 10 million netbooks were sold in 2008, surpassing the research firm's earlier estimate of eight million -- and leaping from the hundreds of thousand believed to have been sold in 2007.
Some companies initially predicted that netbooks would find their biggest audience as a first computer purchase for customers in emerging economies. Now, though, many industry executives agree that netbooks are mainly being purchased as a second or third computer in more affluent households -- good for quickly checking Web sites, but not powerful enough for chores such as burning DVDs.
Another issue has been whether netbooks are expanding the PC market, or taking sales from more expensive laptops. "This is a class of PC devices that is much more incremental than it is cannibalizing," argues Brad Brooks, corporate vice president of Windows consumer product marketing.
Mr. Brooks estimates that more than 80% of netbooks now ship with Windows, compared with less than 10% when the devices first went on sale. But most run XP, and analysts believe that Microsoft receives less revenue and profit from that product than the newer Windows Vista software that comes with other laptops. Intel has said its prices and profit margins on Atom also are lower than on some other chips.
Any line between netbooks and higher-end laptops stands to get even blurrier, as competition causes companies to add more features to their products. Dell, for instance, now sells a $499 netbook with a screen measuring 12 inches, essentially a scaled-up version of an earlier product with an 8.9-inch screen. H-P, in addition to its higher-priced dv2, at CES is introducing a $499 extra-durable netbook with a 10-inch screen that is aimed at business customers.
Jonathan Kaye, the marketing director for H-P's consumer notebooks division, said that until recently, PC companies have been building machines that conform to "a fairly strict definition of what a netbook is," set largely by Intel's specifications. But, he adds, "that could change over time" as manufacturers add more sophisticated features.
Roger Kay, an analyst at Endpoint Technologies Associates, says H-P's new laptop is evidence that netbooks and the competition they have spurred are dragging down PC prices and taking sales from more-expensive models. PC makers are "eating their children," he says.
Chip makers certainly don't intend to let Intel run away with the market. Via Technologies Inc. is expected to discuss its competing microprocessors for netbooks at CES.
AMD, though not selling a chip for netbooks, says that most consumers will prefer machines like the dv2 that use its microprocessors and more powerful graphics circuitry, in a combination code-named Yukon that it is announcing Tuesday. Nvidia Corp., another maker of graphics chips, wants to convince netbook makers to use one of its graphics chips alongside Intel's Atom -- providing what it estimates to be 10 times the performance of the accessory chips Intel offers with its microprocessor.
Then there is the issue of the time it takes to start Windows. Phoenix, which sells PC makers built-in programs that control the boot-up process of their systems, estimates that its HyperSpace software can let users start surfing the Web in a few seconds, save energy and avoid security problems associated with Windows. The software comes in two versions, priced at $39.95 and $59.95 for a year of use.
We have pondered previously whether or not netbooks would indeed cannabilize the PC market (Will Netbooks Cannibalize Notebooks? and Impact of Low Cost PCs ) and we also noted some executives did not see netbooks as a threat (Wistron Chairman says Netbooks not a Threat). It was therefore interesting to read the the Microsoft corporate vice president as saying netbooks are "incremental" machines. Netbooks were launched over a year ago and the playing field is admittedly becoming more clear.
I also thought it was interesting to note how the technologies are converging. The world is definitely becoming an interconnected mobile world with communications available to anyone, anywhere 24/7.
My final thought on this article, and probably the greatest lesson we can learn, is that the next big product hit might be just round the corner. Who would have thought that a little over a year after launching the netbook, the market sector would be so significant for the players therein. Asus should really be congratulated on their innovation and their willingness to try selling these low power, cheap computers. For two long the standard perception in the computer industry was faster, more powerful machines are better. No one really thought portability could be a significant purchasing choice for some people. Asus really did a wonderful job of changing the face of an industry that was becoming increasingly stagnant and commoditized.
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