Wednesday, March 25, 2009

Netbook Evolution May Alter Technology Industries

Leading netbook manufacturers Asus and MSI confirmed recently that they are developing netbooks powered by ARM processors. The machines will likely be unveiled this June at Computex 2009 in Taipei. Earlier, Asus announced its intention to develop an Android-based netbook (optimized for ARM processors and touch screens). If they find broad consumer acceptance, these innovations could impact the traditional market leadership of Intel and Microsoft in the PC industry’s strongest growth category.

The introduction of ARM processors and an operating system created for smartphones pushes the debate over whether netbooks are indeed a unique product category, or just a lower-cost, lower-function notebook. Currently, most low-cost notebooks are powered by x86 chips and run a Microsoft or Linux operating system. But ARM processors dominate all other mobile electronics product categories, including nearly all smart phones. And ARM processors are produced by a collection of companies (e.g., Texas Instruments, Qualcomm, Freescale and others ) eager to bite into Intel’s 90 percent market share in PCs. Indeed, one analyst predicts that 55 percent of netbooks will be running ARM processors by 2012. In anticipation of changes to come, Intel is working to make Android function well on x86 processors, and Microsoft may have little choice but to port Windows 7 to ARM processors.

A shift to ARM processors or alternative software platforms could present an opportunity to companies willing to challenge industry giants. Technology companies that have had to play by established hardware and software rules could take advantage of netbook manufacturers’ new openness and see real traction in certain product categories and market segments. If netbooks begin to resemble oversized smartphones rather than small notebooks, there may also be an opportunity for “netbook apps stores” – the netbook equivalent of Apple’s hugely successful app store for the iPhone. A wide variety of industry players could claim this prize, including Apple, Google, Microsoft, PC companies, or even telecoms operators offering subsidies for netbooks purchased with a data plan.

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