Are the affordable netbook’s days in the sun numbered?

1 May 2009

The global recession has made affordable Atom-powered netbooks chic, but according to iSuppli, once the upturn arrives buyers will return to more expensive personal computing devices.

As consumers’ disposable incomes dwindle, they are flocking to buy low-cost netbook PCs, driving global shipments up by 68.5pc in 2009 and by a whopping 2,424pc in 2008, according to iSuppli.

However, as economic conditions improve in 2010 and beyond, shipment growth will inevitably fall from these stratospheric levels.

“People are not buying netbooks because they are truly desirable platforms, but rather because, as low-cost PCs, they offer a good mix of features at an acceptable price point,” said Matthew Wilkins, principal analyst, compute platforms, for iSuppli.

“With financial motivation a key factor in many netbook sales, growth of the netbook platform is likely to slow down when the economy comes back and consumers have more money in their pockets.”

Global shipment growth for netbook PCs will decelerate to a less astounding – but still impressive – 39.6pc in 2010, and will continue to slow to reach 13.1pc in 2013, according to iSuppli.

iSuppli defines the netbook as a mobile PC with a fully functional operating system, including local storage, a keyboard and wireless connectivity. Netbooks are priced at less than €500.

The primary function of these devices is portable internet access, along with providing a basic computing experience and serving as a low-cost alternative to other types of PCs.

As a result, much of the growth of netbooks has come at the expense other PC categories, particularly desktops.

Global desktop PC shipments are expected to drop by 9.5pc in 2009. However, while desktop shipments are set to continue to decrease during the following years, the rate of decline will slow as consumers regain their purchasing power.

But as the economy recovers and consumers’ appetites turn back to higher-performance systems, netbook brands may be tempted to add features and boost the performance of their products.

Intel, which enabled the netbook revolution with its Atom processor, is already upgrading its netbook PC silicon platform to support high-definition video playback.

In addition, display sizes are moving to the 10-inch range, up from 7- and 8.9-inches. NVIDIA has also offered its Ion platform, using a GeForce 9400M chipset along with Intel’s Atom processor, a solution that increases the graphics performance of the netbook platform.

However, netbook makers should be wary of this trend, Wilkins warned.

“Some of these high-tech features that increase netbook performance are questionable,” Wilkins said. “Netbooks are inherently inexpensive platforms that sacrifice performance and bells and whistles to achieve low pricing.

“While netbook capabilities and performance will inexorably rise in the coming years, the more powerful they become, the more threatening they become to regular notebook models – through comparable performance but lower price.”

With the price differential between netbooks and low-end notebooks as little as US$100 in some cases, netbook makers must be careful to keep the costs of their platforms down.

The rise of the netbook market has come as boon to PC microprocessor suppliers, particularly Intel. Atom is clearly not a performance-orientated processor, yet due to the ramping up of netbook shipments, the processor is having an impact on the company’s revenues.

The demand for netbook and value notebooks has resulted in some suppliers noting slight increases in demand for single-core processors as a result, iSuppli said.

By John Kennedy