Netbooks v notebooks – is the PC industry trying to cannibalise itself?

11 Sep 2008

Sub-notebook PCs are beginning to enter the market. They are proving popular but can they give the PC industry the growth it so desires?

Laptop computers have been with us for over 20 years now and today they are the largest-selling segment of the personal computer (PC) industry. But at the height of this success, the PC industry has decided to something that could either explode the market for personal computing or see the low-cost notebook market blow up in its face.

For a country like Ireland, where PC penetration has been disastrously low, the advent of netbooks or mini-PCs like the Acer AspireOne or the Asus EEE PC could make computing and internet access more affordable for students and the elderly and give professionals more flexibility.

These netbooks, or sub-notebook PCs, typically come with an 8-inch or 10-inch screen and retail for less than €300 or €400. The computers weigh less than a kilo and can slip easily into any handbag, schoolbag or briefcase.

The machines generally come with either Windows XP or a Linux operating system, allowing workers to do word processing, write emails, work on spreadsheets and, most importantly, surf the internet via wireless broadband.

Manufacturers like Acer have formed bundling deals with broadband providers like Digiweb, while Dell has introduced a sleek Mini 9 netbook with built-in 3G broadband from Vodafone. Carphone Warehouse has an offer that includes an Asus netbook, a Nokia phone and a 3 broadband connection for €149. Aldi will have a netbook with a 10-inch screen out next week in the Irish market for €399.

But what are the PC manufacturers thinking? Surely these snazzy new devices they are hoping will sell well could cannibalise the market for low-cost laptops, which are bulkier but can handle heavier workloads and can now be bought for less than €400?

Research firm Gartner predicts the PC industry will ship 5.2 million sub-notebooks this year, growing to eight million next year. By 2012, the industry may be shipping as many as 50 million of these devices.

“The demand for mini-notebooks will be driven by several factors, their small form factor and screen, their light weight, their price, their ease of use and basic and sufficient PC functionality,” explains Annette Jump, research director at Gartner.

“Potential users are likely to include both first-time buyers seeking a low-cost introductory PC, as well as experienced users seeking a low-cost second or third PC for themselves or a relative.”

Jump says Gartner does not expect any major cannibalisation of notebook shipments by sub-notebooks in 2008 or 2009 because there is a significant functionality gap. But from 2010 these products will cannibalise low-end notebook PCs if their performances improve and they prove attractive to business users.

“This is an incremental emerging market for us,” says John Roberts, business director for Acer’s EMEA division. “The initial market we envisaged was students but since we brought our netbooks to market the applications are right across the spectrum. For example, next week I’ll be going to the US on holiday. I’m not going to book any hotels but will plan my trip as I go along and I’ll use my netbook to reserve rooms.

“Businesspeople and other professionals will look on them as purely a way of accessing the internet and doing some work, but for more intensive applications like creating a PowerPoint presentation, I’ll use a full notebook PC.”

Roberts says Acer’s AspireOne range ships with the Linux operating system and users can carry out standard office applications like word processing, email, presentations and spreadsheets with pre-installed software. The devices will be on sale in most major Irish electronics stores like DID Electrical, Currys, PowerCity and Harvey Norman.

A key enabler of the netbook market thrust is the arrival of Intel’s Atom processor. According to Intel Ireland spokesman, Colin McHale, the processor enables greater power supply, giving up to six hours’ battery time.

“A lot of people will look at these products as a way to get started with computers, which will help remove the digital divide. However, a professional travelling to the UK for the day can use netbooks as a way to continue working without lugging heavy devices along with them. They are sufficient to manipulate Word documents or spreadsheets while you’re on the move.”

Another entrant to the netbook market is Lenovo, which in recent weeks introduced the S9 and S10 IdeaPad devices, which will sell from €349.

David McQuarrie, executive director in charge of notebooks across Lenovo’s EMEA group, says he envisages only a marginal impact on the low-cost notebook market by the onset of netbooks.

“We see this as a new category of products. We don’t envisage any significant cannibalisation. If you look at the lower end of the notebook market, most 15-inch laptops are big and bulky and have only a few more bells and whistles than a netbook.

“Because they will sell for around €300, the netbook will be attractive to young people and we see them being given as presents this Christmas. This is an emerging category and manufacturers like Lenovo want to get these products to market as fast as possible.

“Early adopters like children will use them, while at the other end of the spectrum, middle-aged people who want to be part of the internet revolution yet don’t intend to do computer courses can dive right into email and the internet,” McQuarrie explains.

Carphone Warehouse Ireland boss, Stephen Mackerel, predicts netbooks will be the must-have technology item this Christmas. “Young people who want to surf the web and access Bebo and Facebook will want them, while parents who want to book Ryanair flights will see them as being useful too.

“Twelve years ago, most people had one phone in the house. If you predicted then that everyone in a decade’s time would carry their own mobile phone you would have been laughed at. We see the same trend happening with mobile computers, very soon everyone will own one.

“People in households, teenagers in particular, will want their own laptops. For example, every college course insists students have laptops now. So here is a market with quality, affordable computers with internet connectivity. You are going to see some very aggressive offers in this space in the coming months,” Mackeral predicts.

By John Kennedy

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years