eWeek reports on the "troubling" lack of revenue generated since the introduction of "netbooks". Let's take a look at recent events before employing the term "destroying" again in a title.
Foul. There, I said it. Can we move on now?
Everybody knows that, at first sight, lower average prices for notebooks is a bad thing in a economic troubled era but panic must not ensue. These prices are being artificially lowered because of the following reasons but not limited to:
- We're in a recession(or whatever you like to call it)
- "Netbooks" can't be priced higher because Microsoft limits the amount of RAM, HDD/SSD size and screen you're allowed to bundle XP with.
- Nobody wants Vista.
- The DRAM industry ASPs hit rock bottom when this data was taken and is only recovering now.
And are being rightfully lowered because:
- Most useful apps are processed on the server right now and more demanding ones should follow that route soon - the little Atom becomes enough.
- I can has 7+ hour battery life for $399! Cores 2 $1000 no can not has.
- Lower thermal output from CPU and chipset(Poulsbo) means less money spent on thermal design R&D and parts.
Yet, most netbooks are overpriced. I've seen crap netbooks selling for $399 and better laptops selling for $399. I then witnessed the netbooks go down to $300, over the course of three months, while these $399 laptops now sell for $499.
The strategy right now is build the cheaper you can to sell for $399 and go down to the tune of your sales - or stay put. When the netbook is old and selling for sub $300, launch a new model, with little difference, for $399 and start again. This is what Asus has been doing with the Eee PC.
Netbooks are making money, they sell a lot and I would bet for yet higher margins than most laptops.
But Intel is scared with what it's little chip can do and, like in the Netburst times, it's sitting around doing nothing with it's new pearl. Intel lacks the will to embrace progress gracefully, like AMD has been doing with it's new gem and the Atom is progress: it's the laptop processor and it could be much more.
It isn't the costly to build, power management-less Celeron M, and a dual core would be considerably better all around then the Core based Pentium Exxxx. Yet Intel refuses to embrace the new chip, in a situation all too similar to what the Pentium M ended up doing to the Netburst based chips.
While the higher volume sales of notebooks today also contribute a lot to what's been happening to ASPs, one has to consider the impact of the massification of wireless networks. Manufacturers themselves haven't expressed problems with margins - AFAIK - still, I read this:
By moving netbooks to a fully subsidized model, carriers would benefit from locking customers into lucrative data contracts.
Which is a recipe for evil - as far as consumers go - and:
Overall laptop ASPs would go down, perhaps even more, but margins would go up.
And both of which make me wonder which shares does Mr. Joe Wilcox own.
AMD is playing catch-up and soon will have a dual-core 15W chip while the dual core Atom can go lower than that but not with the same performance, right now. HP likes cheap chips and has been enjoying good margins with the DV2, the $699 12" laptop with technology from two years ago - which is still a good thing. Usually the 12" category went closer to double that, in part due to the inherent thermal design constraints that are now mostly irrelevant.
ARM chips are gearing up to own the low-end of the spectrum - a $150-$299 spectrum - with more battery life than what Atom chips can do right now and cheaper, also due to the lack of the same thermal constraints that traditional chips have suffered from.
I won't hesitate to pay a higher price than $399 for a smaller and well engineered notebook with a 15w dual-core chip, be it from AMD and Intel - blue just seem unwilling to give it me since they like to position ULV chips as premium items.
We now have the means to achieve 16+ hours battery life on decent sub-$1000 laptops, I'll say one word when I get there: progress. I'll worry about margins, ASPs and it's effect on the industry latter.
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