Netbooks have not been able to do too much in terms of cannibalizing notebook sales, and we have Intel to partially thank for this. Intel has imposed a limitation on netbook screen sizes, i.e. netbooks that are powered by processors in the Atom N series have been restricted to screen sizes no larger than 10.2″. This may change soon, as Intel may lift this restriction in the latter half of 2010, particularly with devices that are powered by the dual-core Intel Atom N550 processor.
Surprised? I’m not. Netbook sales have started to level off recently, so Intel is looking for a way to keep netbooks interesting. Some consumers believe that netbooks are too small to be efficient, so by enlarging the overall size of netbooks, sales in this area of the market would potentially be much greater.
In addition, ARM-based smartbooks with screen sizes larger than 10.2″ will be coming in the near future. Intel wants to keep ahead of its competition, so it’s loosening the restrictions on which netbook sizes their processors can support.
Of course, increasing the size of a netbook would further blur the line between such a device and a notebook, leaving us with one question… when is a netbook no longer a netbook, but instead an ultraportable or a notebook? Check out one of our previous articles for some details.
With the introduction of its Atom chip, Intel has been a significant player in the netbook market. Intel CEO Paul Otellini is optimistic about the future performance of this market. He see revenues and earnings from netbooks increasing from single digits this year to low double digits within the next few years.
According to Otellini, computers are in “a growth industry,” especially with the growth of the technology in emerging markets such as China, India, and Brazil. “We’re on top of a growth engine and we intend to deliver.”
What does Otellini have to say about Apple and the new iPad’s impact on netbook and notebook sales? Otellini believes that tablets and netbooks offer additional means for consumers to stay connected, “I don’t think they will take away market share from other devices.”
Really? We’ll have to see about that — only the future can tell. We’ll be sure to keep you posted on any new developments.
Intel CEO Paul Otellini acknowledges the growth of the netbook segment of the overall notebook market but says that, “while Atom and Netbooks are important growth drivers for us, our traditional notebook business remains one of the primary drivers of revenue growth and we expect that to continue in the future.” Otellini believes that both netbook and notebook sales will both continue to rise.
Otellini is also optimistic about sales of ultrathin laptops, relatively inexpensive alternatives that cost between $500 and $900 each and fall in the notebook category between netbooks and laptops. Various dual-core ultrathin laptops have already been released and much more will be released in time for the holiday season.
According to DisplaySearch, 2Q 2009 was lucrative for netbook industry giants, with 38 million netbook sales contributing to 22.2% of the PC market.
Demand grew 40% over the first quarter, compared to 22% growth over the same period by notebooks.
Growth wasn’t identical among all regions, however, with Latin America and China seeing the most gains. Many first-time buyers in those regions are opting for cheaper netbooks in the current tough economy.
Through the short time netbooks have been around, they have been attacked by many claiming they’ll cannibalize an already suffering market; with buyers opting out of higher-end notebook sales in favor of the diminuitive machines.
Mark Hurd of HP was recently interviewed on the subject. He says HP can’t say for sure yet if its sales are being cannibalized, due to the short time they’ve spent in the market, but he has his doubts:
“It’s not the move to netbooks that’s cannibalizing. What you have is someone buying a more thickly configured notebook, who’s now buying a more thinly configured notebook, and that’s what’s adjusting the ASP [average selling price].”
This explains the primary evidence most use for cannibalization: shipments are up, but revenue is down. It has also been suggested that the drop in sales would have been even more drastic but for the existence of the netbook sector, which offered cost-wary consumers an outlet to compute.
However, other analysts bring in the idea that Acer, whose massive successes in 2008 were in large part due to netbook sales, is using the netbook to take a chunk of the market previously owned by Dell and HP. The Acer Aspire One has been extremely popular, and has brought Acer to the top from its previous obscurity.
IDC analyst Richard Shim captured the rapid evolution of the netbook market quite succinctly:
“In just over a year, they’ve (netbooks) evolved from these Linux-based, solid-state devices into fully [Microsoft] Windows OS-based, 120GB hard drive systems, which are very similar to traditional notebooks. So we’ve had a dual effect here, with many netbooks becoming more robust and expensive, while notebooks have come into the same price range.”
Intel’s wariness in boosting the power of the Atom N270 led to the intentional capping of that chip’s power for the N280 update. This was done, of course in an effort to reduce the ‘damage’ the successful netbook chip was having on Intel revenues. Intel profits were crushed in 2008, so it’s possible that their anxiety was well placed. In the instance of the Atom N280, fears of cannibalization have directly affected the products offered on the market.
For now, the issue of whether netbooks are cannibalizing the industry is still unresolved. It’s important, however, to take a hard look at the numbers when making one’s analyses. There are plenty of alternative explanations for the seemingly paradoxical situation of an industry with greater sales and less profit, and they need to be investigated as well.
Notebook sales have recently valuted those of desktops, and according to a report by CNet, this is due to the growing sales of Acer netbooks.
In the third quarter of 2008, notebook shipments grw 40 percent as compared to the same period in 2007. iSupply, a market research group based in CA, places the growth to a massive 38.6 million units.
The principle analyst of compute platforms at iSupply, Matthew Wilkins, believes that “The big news from iSuppli’s market share data for the third quarter was undoubtedly the performance of Taiwan’s Acer.”
“Acer shipped almost 3 million more notebooks in the third quarter than it did in the preceding quarter, with the majority of those 3 million being the company’s Netbook products,” he said.
Wilkins also believes that Acer will soon catch up to Dell sales due to netbook shipments.