Acer Rises to No. 2 in Q3 2009

In Acer Climbing to No. 2 we noted that IDC reported Acer was the second largest PC distributor behind HP with a market share of 18.5%. Today Reuters reports Acer has surpassed Dell in Q3 2009 as well. Reuters says:

Taiwan's Acer Inc (2353.TW) surpassed Dell Inc (DELL.O) to become the world's No. 2 PC maker in the third quarter as worldwide industry sales proved surprisingly strong, spurring hopes that demand is rebounding.

According to Reuters Acer now has a PC market share of 14% while HP leads with a market share of 20.2% and Dell at 8.4%. Are Dell in trouble? ASUS and Lenovo will be fighting for more market share and both those companies may start to attack Dell's position in the market. Only time will tell.

Reuters: Acer passes Dell as global PC shipments rise

PC Demand is Climbing

Reuters reports that demand for PCs is starting to increase again but argues that the PC manufacturers have defended their market share (and tried to seize market share) with aggressive pricing strategies. According to Reuters:

A gradual bounce back in consumer demand is helping keep the struggling personal computer market afloat, but plunging prices and a shift toward cheaper machines will keep up the pressure on profits.

Globally, consumers are coming back to PCs, but they are doing so at prices as much as one-fifth lower than even a year ago, analysts say.

Hewlett-Packard Co, Dell Inc and rivals Acer and Lenovo have slugged it out to keep sales up and safeguard or take market share: a battle that of late has been waged by aggressive pricing, analysts say.

Pacific Crest Securities analyst Brent Bracelin noted PC prices have fallen for years, but the decline accelerated with the introduction of no-frills netbooks. He said PC makers have plenty of experience managing costs to maintain margins.

"There's always going to be pressure," he said. "The question is how well do you manage the supply chain and try to reduce costs at the same pace as the price decline or faster."

The global PC market is still limping along, with second-quarter shipments falling 5 percent from a year ago, according to Gartner. But that result was better than expected, and Gartner said the continued growth of low-cost laptops was a driving factor.

A bounce back in the PC sector is good for Taiwan. The bounce back, if real, will certainly seep through the supply chain and increase demand from PC component suppliers. This in the long run will have a positive impact on the Taiwanese economy and hopefully ensure people here will be able to find more jobs and opportunities. The other interesting side of this would be to understand who has lost and gained. There was speculation earlier in the year that ACER would climb above Dell to no. 2. Time will tell I suppose but my guess would be that in these times that demand frugality and attention to cost, the Asian suppliers might be better off.

Consumer PC demand is back, but at what price?

Are Desktop PCs a Spent Force?

Reuters has a very interesting article on the decline of the desktop PC market and the rise of notebooks (laptops). According to Reuters:

The age of the desktop PC appears to be over as its more portable cousin, the laptop, surges ahead with consumers clamoring for light-weight computers in funky designs for use at home, in cafes and on the train to work.

Not a single desktop model figured on online shopping portal Amazon.com's top 10 selling PC and hardware list the weekend before Christmas, while seven laptop models made the list.

It was yet another sign that the former dominance of desktop PCs is fading as wireless advances and lower prices make laptops the preferred option for millions of PC users around the world.

"On both price and performance, laptops are so competitive now it's surprising they weren't able to catch up with desktops even earlier," said iSuppli analyst Peter Lin.

Of course, if this is true, its good for Taiwan. Reuters continues:

Many companies eagerly awaiting the era of the laptop are in Taiwan, maker of about 80 percent of the world's laptop PCs. They include the world's top two contract manufacturers, Quanta and Compal Electronics, and two of the most aggressive laptop brands, Acer and Asustek.

While those firms have seen their market share rise, the world's top two PC makers overall, Hewlett-Packard and Dell, have seen their share shrink.

Other companies that produce parts such as motherboards for bulky desktop PCs are already switching production to parts for other electronic gadgets such as iPhones.

While laptops used to cost more than double that of a desktop with equivalent processing power, advances in technology and economies of scale have dragged prices down so much that little price differentiation exists today for most consumers looking for a daily use PC, analysts say.

"It's just evolutionary I suppose," said Gartner analyst Tracy Tsai. "Things have reached a point where the price difference is no longer as pronounced as before for many consumers, and the average person is more likely to choose the option that offers him portability over the one that doesn't."

The growth in the notebook PC market is good for Taiwanese companies since they do dominate the market globally. Of course there are a few other companies that manufacture notebooks including Inventec. HP and Dell will have to become far more competitive in the notebook market to be able to compete effectively with Asus and Acer, who seem to respond to market demand very quickly.

Reuters: As laptops dominate, desktop PCs face obsolescence

Netbooks Rising

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.

WSJ: High-Tech Companies Take Up Netbooks

H.P Breakthrough in Memory Design

The New York Times (NY Times) reports HP scientists have developed a simple circuit element called the memristor that will facilitate the development of smaller circuits. According to the HP scientists, current chip technology is at 45 nanometers and the semiconductor industry can only see shrinking circuits to 20 nanometers based on current technologies. The memristor enables circuits of 15 nanometers to be developed and, according to the HP scientists, can be dropped down to 4 nanometers.

While they are touting this new component as an essential building block for advanced circuits for intelligent computer architectures, the most immediate commercialization opportunities are in developing computer memory products. The NY Times reports:

The memristor, an electrical resistor with memory properties, may also make it possible to fashion advanced logic circuits, a class of reprogrammable chips known as field programmable gate arrays, that are widely used for rapid prototyping of new circuits and for custom-made chips that need to be manufactured quickly.

Potentially even more tantalizing is the ability of the memristors to store and retrieve a vast array of intermediate values, not just the binary 1s and 0s conventional chips use. This allows them to function like biological synapses and makes them ideal for many artificial intelligence applications ranging from machine vision to understanding speech.

Independent researchers said that it seemed likely that the memristor might relatively quickly be applied in computer memories, but that other applications could be more challenging. Typically, technology advances are not adopted unless they offer large advantages in cost or performance over the technologies they are replacing.

One limitation is the speed. The NY Times says:

The most significant limitation that the Hewlett-Packard researchers said the new technology faces is that the memristors function at about one-tenth the speed of today’s DRAM memory cells. They can be made in the same kinds of semiconductor factories that the chip industry now uses, however.

However, according to HP, this disadvantage maybe mitigated by the ability of the chip to store data even when the power is turned off. According to the HP press release:

One application for this research could be the development of a new kind of computer memory that would supplement and eventually replace today’s commonly used dynamic random access memory (DRAM). Computers using conventional DRAM lack the ability to retain information once they lose power. When power is restored to a DRAM-based computer, a slow, energy-consuming “boot-up” process is necessary to retrieve data from a magnetic disk required to run the system.

In contrast, a memristor-based computer would retain its information after losing power and would not require the boot-up process, resulting in the consumption of less power and wasted time.

The news is good for Taiwan DRAM manufacturers. If memristors can be made to work faster they will provide companies like Powerchip and Nanya with new market opportunities. Of course the big Korean companies like Hynix will also be looking at this technology to see what its all about. The even better news for these companies is that the theoretical foundation for memristors was developed 40 years ago and as such is in the public domain. Therefore they can develop their own solutions royalty free. Of course HP is filing patents on their implementation of the memristor so to use the HP implementation may result in steep royalty costs.

Article 1: H.P. Reports Big Advance in Memory Chip Design
HP Press Release: HP Labs Proves Existence of New Basic Element for Electronic Circuits

Low Price PCs: Start of a new revolution (maybe)

Digitimes reports that both HP and Asustek are going to launch their low cost PCs in Hong Kong. today. Digitimes says,

With Hewlett-Packard (HP) launching its Mini-note PC in Hong Kong today (April 15), Asustek Computer has also decided to launch its Eee PC 900 in the same region and on the same day, according to channel sources.

Digitimes continues,

After the initial launch in Hong Kong, Asustek will launch its Eee PC in Taiwan, Japan, China, Europe and North America in the later half of April.

The development of low-cost computers is good for Taiwan. The HP variant is apparently based on a VIA Technologies platform. Furthermore, according to China Economic News (CENS), Dell's decision to move into low-price PCs is one reason why Compal, another one of Taiwan`s leading manufacturers of notebook computers, will boost production in China. According to CENS,

Compal Electronics Corp will expand production capacity at its fourth plant in Kunshan of Jiangsu Province, mainland China. The expanded plant will begin mass production sometime in the second quarter of this year to facilitate delivery of low-priced PCs ordered by the U.S.-based Dell Computer Inc., along with the growth in shipments of NBs.

However, Compal president J.T. Chen noted

...his company would introduce low-priced computers sometime in the second half of this year. But Chen noted that shipment of low-priced PCs would account for less than 10% of the company`s total shipment this year.

Commenting on the recent development in this market, CENS observes:

Seeing the successful introduction of the budget-priced "Eee" PC by Asustek last year, Hewlett Packard will introduce the US$500 Mini-Note NB equipped with 8.9-inch screen and VIA Technologies` C7-M microprocessor at the end of April; while Acer will debut its low-priced, Quanta Computer-manufactured NB equipped with Intel Corp.`s "Atom" microprocessor sometime in June.

Digitimes further reports that low-cost PCs are also going to drive the demand for touch panels in 2H 2008.

Low-cost notebooks, such as Asustek Computer's Eee PC, are expected to boost demand for medium-size touch panels in the second half of the year, as adoption of touch panels by these systems will grow fast, according to industry players and observers.

With small-size touch panels already seeing massive adoption by handsets and GPS devices, 5-10-inch touch panels are promising to become a big hit among high-end ultra mobile PCs (UMPCs) and mobile Internet devices (MIDs), as well as low-cost PCs, the sources remarked.

I guess its all good for Taiwan companies. They are all involved in the development and manufacture of these products and the associated components.

(Article 1: HP and Asustek bring low-cost PC battle to Hong Kong
Article 2: Compal Ups Production Capacity in Kunshan of Mainland China
Article 3: Eee PCs and other low-cost notebooks to boost touch panel demand in 2H08)