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

Acer's Rapid Growth

Acer recently became the number one monitor player in India. Channel Times recently tried to understand some of Acer's growing success in India by interviewing S. Rajendran, Chief Marketing Officer, Acer India.

On gaining market share in LCD screens Mr. Rajendran said: "According to IDC, today we stand at the top of the heap as the no. 1 player in the overall LCD monitor market in India with a market share of 15.8% as of Q3 2008. We have grown almost 35% Y on Y from Q3 of 07, when our market share stood at 11.5%. Acer today, dominates the overall LCD monitor market in India with total unit sales of 220, 554 in Q3 2008 alone."

On the response of Indian consumers to Netbooks, Mr. Rajendran said: "The initial response to the offerings has been mind boggling. We are deluged with orders from our retailers and other partners across the country. As of now, how much we sell is more a question of supply rather than demand. We see a continued growth in the netbook front through the next quarter, given the current market scenario and the value add of the product - when comparing cost versus functionality and style."

And Mr. Rajendran also said: "On Notebooks, we continue to maintain the scorching pace we have set in the market world-wide and in India over the past few years. We will continue to be the fastest growing Notebook brand in the top 5 in India too. World-wide Acer is now the no.2 Notebook brand behind the market leader HP. We have also become the 3rd largest PC brand overall in the last one year, which showcases the success we have had across product categories during the last couple of years."

The interview also covers Acer's future channel partner plans and how Acer plans to continue to enhance its position in both the local Indian market and the global market. Its an interesting read. To read the whole interview follow the links below.

ChannelTimes: 'The Future Belongs to Acer' (Part I)
ChannelTimes: 'The Future Belongs to Acer' (Part II)

Another Netbook from BenQ

The title says it all. Reuters writes:

Taiwan's BenQ, the branded unit of Qisda Corp, joined PC rivals to introduce smaller, low-cost notebooks carrying its own name on Thursday, and it aimed to grab a 5 percent share of the new market within two years.

Later Reuters has an interesting perspective on the future of the Netbook market:

Earlier this month, Acer, the world's No. 3 PC vendor, said it expects the global netbook market to reach 50 million units in 2009, and it aims to take 30 percent of that market by selling 15 million units of its own mini PCs. "For our new products, we hope we can have about five percent market share in one to two years," BenQ Corp Chief Executive Officer and President Conway Lee told reporters at a news conference, where BenQ displayed its "Joybook Lite" netbooks.

Lee did not give sales and shipment forecasts of its Joybook Lite PC, weighing about 1 kilo, and which has a 10-inch LED-backlit display and a sleek outer shell to attract design-conscious customers.

Only one comment here, I love the name: Joybook. Can you imagine the advertising jingle?

Happy happy joybook
Happy happy joybook
Happy happy joooooooooyyyyyyyyboook.....

Yeah yeah, I have gone back to my childhood roots.

Reuters: Taiwan's BenQ joins low-cost netbook PC market

Wistron Chairman says Netbooks not a Threat

Earlier this year we noted concerns about netbooks cannabilizing the traditional notebook market in Will Netbooks Cannibalize Notebooks? and Impact of Low Cost PCs . Yesterday Simon Lin, the Chairman of Wistron, said netbooks are not a threat to the traditional markets. Digitimes reports:

Wistron chairman Simon Lin has reiterated his conservative outlook for netbook growth, saying that the position of traditional notebooks will not be affected by the rising role of netbooks over the next two years.

Acer and Asustek Computer might have over estimated the potential of the netbook market as margins from netbook production are still lower than traditional notebooks, said Lin. Netbooks are still uncompetitive in terms of their smaller keyboards and panels, and are therefore still a niche device, he added.

First, I personally think in the short term netbooks may have a chance of stealing short term market share. The current state of the economy and people's traditional concerns about money at times like this will make them more inclined to buy the cheaper substitute, and netbooks are substitutes. Given a decent economy and reduced economic concerns, I would say people would be more willing to buy the more expensive models.

Additionally, I think I said it before somewhere on this blog, I would think demand for more expensive notebooks is probably more price inelastic than say the cheaper models. I would think demand for US2,000 or above notebooks would not be threatened by a smaller US500 model. However, I do think the cheaper notebooks positioned at entry level users (US1,000) may face a bigger challenge.

Digitimes: Netbooks will not affect traditional notebook sales in the near term, says Wistron chairman

Record Sales for IC Design Houses

Digitimes reports that despite an economic slowdown, some of Taiwan's IC design houses are anticipating record sales in August. Digitimes writes:

Despites global economic worries, August sales for some Taiwan IC design houses are expected to hit a record, with companies including Richtek Technology, Global Mixed-mode Technology (GMT), Anpec Electronics, Orise Technology, Sitronix Technology, Ralink Technology and Global Unichip seeing strong sales, according to market sources.

With stronger demand for PCs and notebooks and with the companies increasing their respective market shares in the third quarter, Richtek and GMT both had outstanding performances in July. Both their August sales are expected to be record highs for the companies and their sales in September will keep growing, the sources noted.

The continued strength of the PC sector has been a surprise to many people. In an economic downturn luxury items such as PCs are not meant to sell as well. We have commented before this may be because of the emerging markets in India and China with a growing consumer base that can afford these products and balance the adverse affects of demand in other parts of the world.

It may also be that PCs have become a larger part of our daily lives and perhaps people are seeing them more and more as neccessities rather than a luxury. The advent of the low cost PC and the demand for these products would also have helped maintain demand and keep the design houses in the game as these devices still need chips for the motherboards.

Free ASUSTek Netbook...

...bundled in a two year 3.5G online service contract. ASUSTek are still working to change the PC landscape!

Last week we noted in Bundling Netbooks with Telecom Offerings how both ACER and ASUSTek are negotiating with telecoms to bundle free netbooks with long term online contracts. Digitimes now provides more details about these contracts. Digitimes writes:

Asustek Computer is cooperating with Orange to push out a free Eee PC bundle in the UK market, according to the company.

Asustek is offering its Eee PC 900, which features a Celeron M processor, 8.9-inch panel, 16GB hard drive and Windows XP operating system, in the bundle deal. The deal requires a two-year 3.5G online services contract with Orange, which will cost an average of £25 (US$46.71) per month.

The bundle deal should help ease Asustek's Eee PC 900 inventory pressure.

First thing to note is how ASUSTek are innovating in the way they sell these netbooks. Although they still sell the netbooks directly into the channel, they are also using the netbooks as a value-added component of a telecom deal. This approach to selling is completely different to the normal way of selling PCs and shows how ASUSTek are positioning the product. The product is being positioned as a mobile internet device (MID) and not as a PC. Of course, there are fears these devices may cannibalize notebooks but by positioning them as MID they are trying to put them into their stand alone market segment or develop them as an extension of their smart phone offerings.

Although bundling computers with internet contracts is innovative, the selling strategy will not be new to ASUSTek or ACER. They have, afterall, been selling their smartphones into this channel for a while now and may therefore leverage the contacts they have made in the sales of the smartphones for the sales of the netbooks.

The netbook revolution may have a long way to go before it runs out of steam.

Digitimes: Asustek works with Orange to release free netbook bundle in the UK

Will Netbooks Cannibalize Notebooks?

In the Impact of Low Cost PCs we discussed the possibility of netbooks (low cost PCs) cannibalizing the notebook market. PC World has a good piece about this. PC World writes:

Advanced Micro Devices has no immediate plans to release a processor designed for low-cost laptops, sometimes called netbooks, saying its not yet clear whether or not growing shipments of these devices will cannibalize sales of mainstream laptops.

Some low-end netbook models use an existing AMD Geode processor, but the company hasn't announced a specific processor aimed at this product segment, apart from general plans to release chips based on a low-power architecture called Bobcat in 2010.

"We haven't announced anything for this type of cheap mini-notebook and we're still taking this wait-and-see attitude," said Pat Moorhead, AMD's vice president of advanced marketing.

"The fact that there are a number of models coming out might give the indication that [the market is] growing and everybody wants to do this, but what's interesting is you pull back the covers and talk to people in the industry and they're kind of scared," he said.

That fear stems from a concern that netbook sales will undermine sales of more powerful machines.

"If you can't grow the market with this form factor, then what you're providing is a lower experience for less money, which isn't good for the consumer and isn't good for the [hardware maker], and really isn't good for the channel as well," Moorhead said.

Other companies and analysts are also worried, in part due to the popularity of the mini-laptops.

The recent proliferation of netbooks are largely due to the success of Asustek Computer's Intel Celeron M-based Eee PC, which was introduced in 2007. The June unveiling of Intel's Atom processor, designed expressly for small, inexpensive laptops, spurred the release of a host of copycat devices by hardware makers looking to replicate the Eee PC's success.

As demand and the number of available systems increases, netbooks are drifting further from the original vision for these products as small and inexpensive portable computers. Screen sizes have increased, from the 7-inch screen of the original Eee PC to 10-inch displays on some models, and Windows XP is now an option, replacing Linux as the operating system of choice. Prices have followed.

The original price of the Eee PC was supposed to be US$199, but the devices actually cost $250 or more when they hit the market. Now, an Eee PC 1000H with a 10-inch screen, 1.6GHz Atom processor, Windows XP, and an 80G-byte hard disk goes for around $600 -- more than the price of some mainstream laptops with more generous specifications, including Dell's Vostro 1000 series.

Nevertheless, demand for netbooks appears robust. Asustek -- a bellwether for the netbook market -- last week pared its shipment forecast for mainstream laptops, but said demand for the Eee PC remained strong.

The Atom's apparent success -- based on the number of models announced by computer makers -- is a double-edged sword for Intel. On the one hand, netbooks may open up a new market for Intel's chips, but the company also runs the risk that Atom sales will eat into sales of its mainstream laptop chips as users opt for netbooks instead of more powerful systems.

In a research note, IDC analyst Richard Shim warned that the cannibalization of mainstream laptops sales by netbooks is a concern, but said the threat is diminishing as mainstream laptop prices fall.

"We believe the story line of ultra-low-cost notebooks will increasingly be sidelined as the notebook market continues to offer a better solution and experience at price points similar to what ultra-low-cost notebooks are hitting," he wrote.

Personally I don't think this is all bad for the consumer. As the article above argues, increased demand for the netbooks will put downward pressure on the prices of more expensive notebooks pushing the performance-price ratio in favor of the consumer. I also don't think the netbooks will cannibalize the top of the range notebooks. Price elasticity of demand for those products should be fairly low as people who would normally buy them would buy them for their performance or because they can afford it. I guess the real market to be concerned about are the cheaper notebooks (US$1,000 range). People who typically purchase those products will be more susceptible to the price.

Watching the development of the netbooks and their overall impact on the industry is an interesting case study. We will keep you posted.

PC World: PC Industry Scared Netbooks May Hurt Laptop Sales

Bundling Netbooks with Telecom Offerings

ASUSTek and ACER are in talks with Telecoms around the world to bundle their netbooks (low cost PCs) with wireless 3.5G services. The bundling will enable the netbooks to be sold for as little as 100 yen or one Euro. Digitimes reports:

In addition to Asustek Computer's cooperation with Japan-based telecommunication vendors to push out a 100 Yen (US$0.91) Eee PC bundled with 3.5G online services, the company is planning to push out a zero or one Euro (US$1.52) bundle with telecommunication vendors in Europe. Meanwhile, Acer is also planning to follow suit and will push out free netbook bundles as soon as the company solves its processor shortages, according to sources at telecommunication vendors.

Currently, Asustek's telecommunication partners are T-Mobile and TNT in Europe, and NTT Docomo and E-Mobile in Japan. Asustek has cooperated with E-Mobile over the 100 Yen bundle with its Eee PC 701 and the company is currently in negotiations with European telecommunication vendors for new bundles in Europe.

Acer has also talked with several telecommunication vendors for cooperation, which could bring the netbook bundle price down to zero which is the main reason Acer is still confident of achieving its shipments goal of five million units in 2008, the sources believe.

This is similar to the way phone manufacturers bundle their phones with telecom packages. For example my mobile phone was valued at NTD10,000 but on a two year package with my provider it only cost around NTD2,000. The bundling of the netbooks with 3.5G offerings is an impressive and innovative packaging deal that will continue to change the personal PC landscape. It seems this sector has a long way to go before their innovations run out of steam.

Digitimes: Asustek and Acer to cooperate with telcos for low-price netbook bundles

Impact of Low Cost PCs

Digitimes has a very interesting commentary on the impact of low cost PCs (netbooks) on notebook sales and also on the LCD panel market. The netbook market is expected to grow rapidly over the next couple of years and this growth will especially impact both the screen manufacturers and possibly the sales of the high-end notebooks.

The expected staggering growth is tempting for panel suppliers. Panel makers will typically roll out netbook panels from 5G lines, with a single substrate producing 45-54 8.9-inch or 10-inch panels. That means a panel maker would only need to devote 10,000-20,000 5G substrates per month to achieve a monthly output of one million units for the segment.

Producing the panels may be easy, but selling them not so much. The market may not be as big as expected. And judging from the panel makers' shipment goals for the segment, the total apparently exceeds the expected size of the market this year, which could mean a price slump because of over-supply.

Netbooks are chiefly targeting users shopping for a second notebook. But under the present economic downturn, the low-cost models are also cheaper alternatives to regular notebooks for first-time buyers.

The regular notebook market, excluding the 5-10-inch segment, has a size of more than 100 million units a year. If netbook shipments in 2008 really jump to 15 million units, it will not be difficult to imagine the impact they may have on the regular notebook market.

The problem for low cost PC manufacturers is the impact on profit margins and net profit. I can't imagine the manufacturers are making much off these computers (I don't know what the margins are) but despite the tremendous success of the low cost PC and especially the Eee PC, ASUSTek profits still showed a 18% decline in Q2. Reuters reports:

Asustek Computer, the world's top PC motherboard maker, said on Wednesday its second- quarter net profit fell 18 percent but expected a stronger third quarter for its laptop PCs.

Asustek's net profit was T$5.644 billion ($183 million), lower than T$6.846 billion a year ago and also down from T$7.23 billion in the first quarter.

The result was slightly above a consensus forecast of T$5.23 billion, according to eight analysts polled by Reuters Estimates.

Asustek also expected its third-quarter notebook shipments to rise 25-50 percent from the second quarter to 1.5-1.8 million units.

An increase in notebook shipments in the current environment may not translate to an increase in the net profit. Reuters (and I haven't found any other sources either) do not show if the 25% - 50% expected increase in shipments is accross the board (for both low cost and traditional PCs). If the low cost PCs are cannibalizing demand for the traditional higher-end models (as argued in the Digitimes commentary), profits may take a hit.

The low cost PCs were meant to target existing PC users and were meant to be used as second PCs. Of course this does open a brand new market and certainly makes it easier for new first-time buyers to purchase a PC without spending a whack of money, but what if PC users like myself replace their older, outdated machines with a netbook? People might argue the storage space is limited, the screen is too small and the keyboard uncomfortable! But there are ways around these problems! What does this mean for the company profit margins?

The problem is an interesting one. Many companies face the same difficulties in making choices for radically different product offerings. Windows XP is the direct competitor to Windows Vista with many users not prepared to switch to Vista. Intel was rumored to delay their quad-core rollout because there was no external competition and they did not want their quad-cores to compete with their other processors.

ASUSTek may have unwittingly launched a substitute for the high-end notebook computers. For them and other manufacturers this may provide challenges. For the screen manufacturers, well they will probably continue to roll along making their screens for whatever model is needed. Of course their profit margins may be impacted too as the higher-end, higher-margin products may see a decrease in demand.

Time will tell, time will tell.

Digitimes: Commentary: The impact of netbooks on the LCD panel industry
Reuters: Taiwan's Asustek Q2 net profit falls 18 pct

Eee PC Online Services

In order to boost demand for their low cost Eee PC, ASUSTek already offer a range of downloads and internet storage options. Digitimes writes:

In order to strengthen demand for Eee PCs, Asustek Computer recently launched Eee Storage, a 20GB Internet hard drive service, and Eee Download, to provide Eee PC users more additional features, according to Jerry Shen, president of the company.

Currently, Eee Download has around 3,000 free software and game titles available for Eee PC users to download. Asustek is planning to expand the service into an online store enabling users to download music and various other content. The service will initially target the Chinese-language market and will be rolled out for Eee family, as well as Asustek's notebook and motherboard products.

I think this actually makes good sense considering the storage limitations of the Eee PC (Linux models have, as I recall a maximum of 20 GB). Also, the download center offering a bunch of additional benefits and an online store will certainly make the offering more complete and more appealing. I haven't heard of any other low cost PC companies willing to offer such a complete service for their low cost PCs (netbooks).

However one feels this is mixing business models and requires significant divesification on the part of ASUS. Online storage companies already exist and users can buy as much or as little as desired. Online storage companies also have features such as and directory sharing. Online stores are also two to a penny and ASUS will have to offer significant benefits as compared to the current e-commerce vendors spawning the internet to generate a successful site.

ASUS should be commended for adding value to their brand and trying to develop comprehensive product offerings, but I feel they are just reinventing the wheel. Or perhaps they are copying the Apple iPod where the hardware and online services were viewed as an integrated solution. Time will tell whether or not these online services can drive demand.

Digitimes: Asustek launches Eee Storage and Download services

Low Cost PCs....The March Continues

A few days ago in The March of the Low Cost PC we noted how Quanta had won an order from Sony for low cost PCs. We also commented how the advent of the lost cost PC caught everyone off guard.

Yesterday the Taiwan based research firm Market Intellingence Center (MIC) predicted the sales of low cost PCs in 2009 would increase by 128%, from 8 million units in 2008 to 18.3 million units in 2009. According to MIC:

According to MIC (Market Intelligence Center, Taiwan), an ICT industry research institute based in Taipei, worldwide low-price mini notebook PC shipment is expected to reach 8.02 million units in 2008. In 2009 shipment volume is forecasted to reach a scale of 18.3 million units, growing 128% annually.

According to MIC Senior Industry Analyst Chris Wei, "the low-price mini notebook PC market was dominated by the Asus Eee PC in the first half of 2008. Acer rolled out the Aspire One notebook PC which is very competitive on price, and Acer has shown an aggressive attitude towards developing the low-price mini notebook PC market. In the second half of 2008 price competition is expected to emerge in the market, and product specifications could be improved by vendors in order to better compete in the market. Consumers will be the beneficiaries of these developments."

Yesterday CNET added to the low cost PC buzz by showing some leaked slides from ASUS suggesting ASUS will develop a family of 23 Eee PCs. According to CNET:

Are you a travel explorer, an editor, or student? Then does ASUS have the Eee PC for you! According to this slide image taken by Engadget Chinese, it looks like ASUS will soon have a total of 23 differently configured models of the widely known Eee PC Netbook series--this includes previously released models, as well as "coming soon," and "who knows when."

And yesterday Digitimes reported Synnex will also join the low cost PC (netbook) fray with their Lemel Q PC Smart deluxe nettop. This will be in direct competition with ASUS's Eee PC and the Wind PC from MSI. Digitimes writes:

Synnex's upcoming 3-liter Lemel Q PC Smart deluxe nettop is based on the Intel Atom 230 processor and priced around NT$13,900 (US$455.7). The nettop will also be offered bundled with a 19-inch LCD monitor for NT$18,888.

This market is growing fast. More and more competitors are jumping into the fray. It seems there is also a lot of growth potential in the sector and that the companies currently in the game will be able to continue to have high margins for a while. Price competition in the future will drive the margins down but at least for now, some PC manufacturers in Taiwan are smiling!

Market Intelligence Center: Global Low-price Mini Notebook PC Shipment Forecast to Reach 8.02 Mln Units in '08, According to MIC
CNET: And the Eee PC hits just keep comin'...
Digitimes: Taiwan market: Asustek, MSI and Synnex to enter nettop war in August

The March of the Low Cost PC

Quamet reports Taiwan's Quanta computers has won a big order from Sony for low cost PCs. According to Quamet:

Quanta Computer Inc (2382.TW) has secured contracts for 10-inch budget personal computers (PCs) from Sony Corp, the Commercial Times reported.

Without identifying sources, the report said the Sony laptops will adopt the C7-M microprocessor from VIA Technologies Inc (2388.TW) and liquid crystal display panels from AU Optronics Corp (2409.TW).

This is indeed good news for Quanta and further highlights the strength of the new low cost PC market. In ASUSTek Changes the Game we noted how ASUSTek "changed the perception of what a computer can and should be." Indeed. The market still has legs.

iStockAnalyst has a nice piece describing the evoloution of the low cost PC market:

Last October, when Taiwan's Asustek Computer launched its first Eee PC - whose new acronym stands for "Easy, Exciting and Economic", instead of the earlier "Easy to learn, easy to play, and easy to work" - it did not expect the low-cost PC to become the latest buzzword in the PC industry.

Bigger rivals such as Acer, the world's No. 3 computer maker, also underestimated the threat from smaller, lower-margin laptops, casting doubt over whether users would buy such "simple-functioning machines".

But then, the US$200 (RM660) Eee PC 701 is much cheaper than the US$1,000 price tag for an entry-level laptop.

Well, figures say it all. Asustek statistics show that it has sold one million units of the Eee PC since its debut until March.

The new Eee PC 900 has an 8.9-inch screen, 1.3-megapixel camera and 12- gigabyte or 20GB solid-state drive. At NT$15,988 (RM1,705), this model comes with either the Linux or Windows operating system.

Surprisingly, the Linux model, which accounted for 60 per cent of the first sales, is well-received by Taiwanese consumers, said Asustek's product manager Jose Liao.

"The overall user-friendliness and other applications bundled in will matter more to consumers when choosing low-cost computers. We leave the choice to them." Indeed, Asustek has a slew of rivals closely tailing its back. Other Taiwanese computer makers such as Elitegroup Computer Systems, Micro-Star International and Gigabyte Technology have all unveiled plans to grab a slice of the pie.

At the recent Computex Taipei trade show, Acer introduced its first ultra-low-cost laptop armed with Intel's Atom microprocessor. Also lighter than 1kg, this machine makes a good fit for those looking for a handheld device with PC-like Internet experience, said company president Gianfranco Lanci.

Foreign bigwigs have not been spared from the frenzy either.

In early April, US-based Hewlett-Packard introduced its first low- cost notebook, the 2133 Mini-Note, aimed at the education market. Hitting stores with prices that start from NT$17,900, the machine weighs 1.2kg, is 33 millimetres thin and has an 8.9-inch screen. Wireless is built-in, and Webcam is optional.

Yes, many companies it seemed did underestimate the threat from the low cost PC model. The early-mover advantage gained by ASUSTek in this market has helped them strengthen their position in the global PC market and helped them to become more competitive than ever. What amazes me is no one thought of this idea earlier! Well, perhaps they did, but no one ever took the initative to develop these platforms. This sector is rapidly becoming as competitive as the other PC sectors and ASUSTek will have to continue to innovate to stay ahead.

But for now, the rapid growth in the low cost PC markets is good news for the notebook contract manufacturers like Quanta, Wistron and Inventec.They will surely receive a lot of orders.

Quamet: Taiwan's Quanta wins Sony order for budget laptops - report
iStockAnalyst: Low-Cost Computers Gaining Ground

CNET Reviews the ACER P241W

CNET has a great review on the ACER P241W low cost PC. The PC comes in at around USD380. CNET were no too impressed with it and recommend an alternative low cost PC. The most impressive feaute of the P241W is the brightness of the screen. CNET claims this is the brightest screen they have seen. CNET writes:

The Acer P241w can be found for as cheap as $380--a very fair price for a 24-inch LCD--and boasts a unique look and very bright image. Of the five 24-inch displays we've reviewed this year, we'd rank it fourth, but it still does some things better than its higher-ranked competitors. It posted the highest score we've yet seen in our brightness test, although we discovered it comes at the cost of producing full and deep colors and true black. At $380, it's the second cheapest of the five we've reviewed, with the V7 D24W33 coming in lowest at $371. If you wanted something a bit prettier, however, with a better designed connection layout, check out the BenQ V2400W, which can be found for $434. The most expensive of the lot is the $679 Dell UltraSharp 2408WFP. It's the overall best 24-inch display we've tested, thanks to its many connection options and outstanding performance. Unless you absolutely need the brightest screen for the lowest price, we recommend not the Acer P241w but the V7 D24W33 for 24-inch LCD bargain hunters.

The P241W does seem to be a decent product and another choice in the low price PC market sector, which is quickly becoming saturated.

CNET: Acer P241W

Micro-Star Moves into Low Price PCs

Micro-Star International (MSI) has recently followed ASUS, ACER and HP into the low price PC market. MSI has recently launched the Wind "netbook", another name for the low price PC. The Wind PC has a nice review on Geek.com. Geek.com writes:

MSI’s Wind is a 10-inch netbook, designed to compete with the Asus Eee PC 901/1000/1000h as well as any number of similar products that are now available. You might not be familiar with Micro-Star International but they are turning a lot of heads with the Wind, not just for its reasonable price but also a smart design and its advantages over the rest of the field.

The Wind is another white netbook that is built on a small, plastic-y platform, but it differentiates itself with a 10-inch display and an 80GB hard drive. It also bucks the original netbook trends by arriving with Windows XP as opposed to a Linux distribution (a SuSE version will be available in the future). None of these features are completely unique to the Wind though, so the device is competing with its overall quality and design as opposed to any specific killer feature. The Wind uses Intel’s Atom processor as opposed to a Celeron, like the Eee PC 701/900, or a processor from VIA, as seen on HP’s 2133. This means reasonable power and an extended battery life over more power demanding processors.

Personally I must confess I do like the 80GB hard drive. The 20GB Linux hard drive on the Eee PC does seem a bit small considering some of that space is used by the operating system (OS). The Wind seems to be a tantalizing option and something worth looking at if you are in the market for a low price PC i.e. netbook.

Staying with MSI, Digitimes has also commented MSI will be producing low cost PCs for the Korean giant LG Electronics. Digitimes writes:

Korea-based LG Electronics is planning to launch its Atom-based netbook in October this year and since most of the company's notebooks were manufactured by Micro-Star International (MSI), the netbook is also expected to be manufactured by the Taiwan maker, according to sources.

The low price PC market sector is becoming crowded fast. Although ASUS will continue to dominate the sector for the time being, they will need to innovate to stay ahead. All this competition is indeed good for the consumer!

Geek.com: Review: MSI Wind Notebook
Digitimes: MSI has chance to make netbook for LG

ASUSTek Changes the Game

From a 5 June article on Business Week:

While computer makers have pushed to build faster, more powerful laptops in recent years, the executives at Taiwan's Asustek Computer decided to try something different. They thought some people wanted a simpler computer. And they were right. Since its introduction last October, Asustek's Eee PC—a mini-laptop that retails for as little as $300—has become a huge hit around the world. The company expects to sell 5 million units this year. "We changed the concept," says Chief Executive Officer Jerry Shen.

Yes, AUSTek have changed the perception of what a computer can and should be. Low cost PCs are useful devices to those of us who do not require the full power of a PC. Gamers and other high-end consumers need powerful processors and huge storage capacity to play games and store videos and photos. But what about those of us who don't care about games? Why pay for processing power and capacity we will never use?

I guess ASUSTek wisely realized many people only want to be able to type docs, access the net and answer emails. Not all computer users are tech-junkies with a desperate need to over-clock.

Business Week does highlight that ASUSTek is not an international brand like HP, Dell or Lenovo but they do acknowledge the Eee PC has helped to establish their brand. The article also focuses on some of the things ASUSTek has done to become more profitable and competitive including focusing on design and spinning off their manufacturing plants.

Of course standard economics dictates when a product is as successful as the Eee PC, other players will also jump into the market and, according to Business Week,

Asustek still faces some big challenges before it can join the tech industry's elite. Some caution that the mini-laptop's success could erode profitability at Asustek, which made $910 million last year on sales of $24.9billion. Daiwa Institute of Research analyst Calvin Huang estimates the Eee PC's margins are 10% to 15%, compared with gross margins of 21.5% for the whole company. With Hewlett-Packard, Acer, and Dell gearing up to start selling similar machines, margin pressure is likely to grow. "The Eee PC is a significant innovation in the PC industry," Huang wrote in a report last month, but "its success is unlikely to be sustained."

ASUSTek is used to operating in a competitive environment. They may lose some market share in the low cost PC sector but they should be able to hold their own. I think they are doing a great job and should be complemented on their innovation and foresight.

Article: The Mini-Laptop Changing the Game

Growth of Low Cost PCs

ASUSTek has recently launched an 8.9-inch Eee PC. China Economic News (CENS) predicts shipments for these products will reach 1.3 million in Q2 and 5 million for the year. CENS notes this is ASUSTek's first low cost Intel platform. Intel however do have a competing product yet, according to CENS:

Asustek indicated that Intel, though already launching Classmate PC, a competing model against Asustek`s Eee PC, concentrates more on its sales of CPU (central processing unit) and hence has helped Asustek garner numerous governments` tender projects so far.

Digitimes notes that ASUSTek is very optimistic about these products and plan to launch a 10-inch display model later in 2008. Digitimes also notes that while ASUSTEk is aggressively pursuing this market, other players are being far more conservative.

Asustek is believed to have ordered 2.5-3 million Atom processors from Intel, while Acer has ordered around one million and may place another one million unit order depending on market demand for corresponding low-cost PCs in the later half of the year, according to industry sources. Meanwhile, Dell has been more conservative in only ordering around 300,000-500,000 Atom CPUs, while previous reports indicate Hewlett-Packard (HP) has placed an initial order for 100,000 VIA Technologies C7-M ULV CPUs to be used in its Mini-Note products, which will increase to 500,000 units by year's end. Other players including Micro-Star International (MSI) and Gigabyte Technology are even more conservative, ordering far lower volumes than their competitors, according market watchers.

Low cost PCs are also breaking into the industrial PC market with Digitimes reporting that Nexcom will also be launching a medical tablet PC based on the Atom processor.

Watching the growth of this market sector will be interesting. Currently 50% of all demand is in Europe and it will be interesting to see how the regional mix changes over the next year or so. I am personally thinking of buying one of these low cost PCs. I think they are perfect. Light, easy to carry and easy to hook-up to a big external hard drive at home. I guess the real question is why do you need to carry all the storage capacity you don't really use or access? Of course some people will prefer the high-end notebooks but these low price PCs are definitely carving out their own market sector.

Article 1: Asustek Unveils 8.9-inch Eee PC
Article 2: Intel Atom-based Eee PCs in June, 10-inch displays later in the year, says Asustek president
Article 3: Nexcom planning Atom-based industrial tablet PCs

VIA Processors Making a Comeback

According to Digitimes, VIA processors are making a comeback on low cost PCs. Digitimes reports:

With Hewlett-Packard (HP) said to have ordered 100,000 C7-M ULV processors for its initial mini-note low-cost PC launch, (which is expected to reach 500,000 units in total in 2008) while Gigabyte Technology's new M700 series UMPC (ultra mobile PC) will also adopt VIA Technologies' CPUs, the Taiwan-based chipmaker may have a chance of recover from its long series of losses, according to industry watchers.

In addition to HP and Gigabyte, more hardware vendors are said to be evaluating VIA's CPUs for their UMPC and low-cost PC products.

The Atom processors recently lauched by Intel have certain limitations and therefore are not attractive to low cost PC manufacturers.

I also managed to dig up an old 2001 interview with Wen-chi Chen, VIA' s CEO. In that interview he argues for the development of the low cost processor. When asked why focus on cheap processors he argued:

We think that the value-line product will be the fastest growing in the whole PC space. It can easily grow another 20% higher than the whole market. That's the market where people want the products. People are looking at [a] second or third PC for the home, and the value line serves that purpose better..

When asked why, he replied:

The Internet will be the biggest driving force. For Internet applications, the processor is not the main requirement -- the pipe is more important than the engine. It's like the auto industry: It used to be that people build bigger and bigger engines. But the road was only so wide, and car drivers were more limited by the road than by the engine. So people started looking at efficiency of the engine and went to smaller engines..

It seems his 2001 optimism about this market is about to pay off. No doubt however AMD and Intel will respond and, even though the Atom has limitations, if there is money to be made they will readjust their strategy to ensure they stay ahead of the pack.

Article 1: VIA CPUs to stage comeback in low-cost PC market
Article 2: Wen-chi Chen: Taiwan's Answer to Andy Grove? [PDF File]
C7 2006 Press Release: New VIA C7®-M ULV Processor Family
C7 Product Page: VIA C7®-M ULV Processor

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)