The Imminent Netbook Explosion

As netbook sales continue to grow, hardware and software vendors are battling to exploit this relatively new market.

Intel released a beta software development kit (SDK) in early December for developers who create applications for netbooks based on its Atom chip. These apps will run in the Microsoft Windows and Moblin operating systems. Meanwhile, Google has promised a new netbook operating system (OS) in time for holiday sales next year, while computer vendors such as Asus, Dell and Lenovo are jostling to get their slice of the networking pie.

Generally, vendors are positioning the netbook as a second computer — not as powerful as one’s main desktop or hefty notebook, but certainly less expensive and easier to tote around while on the go. Google is also positioning it as a gaming device. Will consumers accept a “less is often good enough” proposition, or will they demand more?

In what directions will the netbook category go over the next few years?

In Tough Times, Cheap Is Good

New features will be driven by consumer demand — once a platform sells well, vendors will do what it takes to make it even more attractive, a cycle clearly seen in the smartphone market. Netbooks figured significantly in the 0.5 percent growth in computer shipments worldwide in the third quarter, according to Gartner. That doesn’t seem like much until you find out that Gartner had expected sales to fall by 5.6 percent. Gartner expects netbook shipments to total 29 million for this year, and to hit 41 million in 2010.

More immediately, netbook sales on Black Friday last month showed a 240 percent month-over-month increase, Vipin Jain, CEO of online consumer electronics shopping site Retrevo, told TechNewsWorld. “We are seeing continued strength in netbook demand through December,” Jain said. Sales of full-fledged laptops were comparatively weak, increasing by 40 percent month-over-month on Black Friday, Retrevo’s figures show.

That strong demand for netbooks is fueled in part by low prices. “Consumers can find really attractive and highly functional netbooks for less than (US)$300 on a regular day and for less than $250 with a deal,” Jain pointed out. He expects more of the same in 2010. “Expect this pricing and demand to continue in 2010 as Google raises the stakes with the launch of a number of netbook products using Chrome OS,” Jain said.

The low prices charged for netbooks require a trade-off in features. “If you mostly just want to surf the Web, write emails, check your eBay auctions and perform other simple tasks, netbooks are good tools and offer great value,” Charles King, principal analyst at Pund-IT, told TechNewsWorld. “You don’t get the power of a full-sized laptop for that price, but you get light weight and a long battery life.”

Looking at the Netbook Market

Vendors have shaped their netbook marketing strategies around that trade-off between features and price. “While screens and keyboards have gotten bigger and many netbooks now have hard drives, the fundamental purpose remains the same — browsing the Web, watch videos and going to social networking sites,” Intel spokesperson Bill Calder told TechNewsWorld.

“Netbooks are primarily going to be secondary companion PC devices for a long time,” Bob O’Donnell, a vice-president at IDC, told TechNewsWorld. “The vast majority of people will use them as a secondary PC to use whenever and wherever they want.”

Google’s Chrome OS is targeted at netbooks that serve as secondary computers and focus on entertainment. These will hit the market in time for holiday sales in 2010.

Meanwhile, Asus has unveiled a netbook with a multi-touch touchscreen; Dell is offering Linux- and Windows XP-based Inspiron Mini 10v netbooks; and other computer vendors are expected to unveil more netbooks at the Consumer Electronics Show, to be held in Las Vegas in January 2010.

Intel’s arch-rival, AMD, appears to be focusing on light notebooks rather than netbooks, at least for now. “They don’t have anything that will compete particularly well with Atom from the power perspective,” O’Donnell said. “Some of their best stuff isn’t going to come out until 2011, so they’re behind the 8-ball.”

The Winds of Change

More than a dozen manufacturers will demonstrate consumer devices that will run live broadcast television over the Internet at the Consumer Electronics Show (CES) in Las Vegas in January. These include netbooks and prototype cellphones equipped with mobile digital TV technology.

Mobile digital TV is just one of the many possibilities available to next-generation netbooks. “Don’t ask me what netbooks will look like in five years,” Intel’s Calder said. “Moore’s Law will still apply, so the Atom processor will continue to get better. You’ll see more things being integrated into the chip, the graphics will get better, and we’re talking about integrating graphics into the chip in the next generation of Atom processors.”

Moore’s Law, named after a concept introduced by Intel cofounder Gordon Moore in 1965, holds that the number of transistors that can be placed on an integrated circuit doubles roughly every two years.

Graphics processing units, or GPUs, will become increasingly important, Bob Morris, ARM’s director of mobile computing, told TechNewsWorld. That’s because netbooks, with their dependence on Internet connectivity, will rely to a great degree on the cloud. “As you get into cloud computing, GPUs become more important than CPUs because you can do a burst of pulling in information and moving it around without consuming as much power as the CPU,” Morris explained.

Integrating the GPU with the CPU is already being done at companies that partner with ARM, whose processors form the basis for Qualcomm’s Snapdragon, another processor used in netbooks. “Some of our partners already have the CPU, GPU and video on one chip,” Morris said. Several netbook vendors will unveil Snapdragon-based netbooks at CES in January.

The lines between smartphones and netbooks may become blurred, predicts Rob Enderle, principal analyst at the Enderle Group. “Smartbooks, which really are netbooks offered by carriers, and smartphones are drifting very close to each other,” he told TechNewsWorld. “A smartphone may simply become a small netbook and vice versa.”

A Netbook App Store?

Another possible future development is apps for netbooks. In addition to releasing the SDK for developers creating apps to run on Atom processor-powered devices, Intel is holding a competition for app devs to create apps for Atom-based netbooks. “It’s all about the content,” Calder explained. “There’s potential for apps to take advantage of this Atom craze that’s going on.”

Will this mean the emergence of a netbook application shop along the lines of Apple’s iTunes App Store? Possibly, IDC’s O’Donnell contended. “I think people have just realized what a clever model that is — to create a place and an environment to sell apps,” he said. “Apple’s led the way, and other people are trying to glom onto that idea.”

However, a netbook app market, if one develops, could be fragmented. Another problem is the existence of multiple operating systems for netbooks. “You’ve got Moblin, Linux, Ubuntu, Android, Google Chrome OS, Windows 7 and Windows XP Home, although the last will go away in October of next year,” O’Donnell pointed out.

Intel doesn’t care which OS developers create netbook apps for. “At the end of the day, we don’t really care, as long as it runs on the Atom,” Calder pointed out.

Will Windows Rule Netbooks?

Over time, Windows 7 will become the de facto leading OS, O’Donnell predicted. “Linux never took off on traditional notebooks because people don’t want too much choice when it comes to operating systems,” he explained. “Most people are used to and familiar with Windows, and I think it will dominate in the netbook market.”

In turn, that would likely mean the Intel Atom will dominate the netbook market in terms of chips. “Qualcomm chips are based on ARM, which doesn’t run Windows,” O’Donnell pointed out. “That means they’ll be relegated to a small fraction of the market.”

However, Enderle did not necessarily agree. “It will depend on how good the Chrome OS eventually is and how aggressive Microsoft gets with ARM,” he pointed out. “Currently, Microsoft isn’t allowing Windows to be used on ARM-based products, but that could change.”

Ultimately, the technology shift may be so great that netbooks will become unrecognizable, he said. “This is the beginning of a massive change, and we’re likely to look at these first efforts much as we now look at the first portable PCs — as ancient devices that no one can believe anyone wanted to carry,” Enderle said. “I still think [‘Star Trek’ series creator] Gene Roddenberry got it right with his communications devices.”