After Two Years of Meteoric Growth, Netbook Market Slumping

Market analysis firm IDC is planning to release a report this week on the state of the netbook market and the explanation for the segment's slumping sales. Atom sales were the one dark spot on Intel's otherwise perfect first quarter, falling significantly compared to Q4 2009 and more than would be predicted by seasonal trends.

"Atom in Netbooks is plateauing," Shane Rau, an analyst at IDC, said in a phone interview with CNET. "With the market recovery, I think end users are going to be looking for more value than just low-cost devices. This is an opportunity for higher-end mobile PCs, for example, that have better performance, bigger screens, bigger hard drives," he said.

We agree with IDC that the economic recovery has probably reduced consumer interest in netbooks but maintain that this is only part of the reason why Atom sales are falling. Atom will celebrate its second birthday in the not-too-distant future, but the platform's performance has scarcely changed. Compare the specs of the Asus PC1005PE (reviewed late last year) and the Asus EEE1002HE (released in February, 2009).
  • CPU Speed: 1.66GHz / 1.6GHz
  • RAM: 1GB / 1GB
  • Operating System: Windows 7 / Windows XP
  • Screen Size: 10.1" / 10.2"
  • Resolution: 1024x600 / 1024x600
  • Storage: Up to 160GB / Up to 160GB
  • Price: $379 / $429
Intel's Pinetrail SoC improved battery life and reduced power consumption, but system performance hasn't budged. The uptick in holiday sales after the N450's launch suggests that the chip's features did resonate with shoppers; the unexpected downturn in Q1 may be evidence that potential customers who purchased a netbook in the past two years are looking for something more. Windows 7 is leaner than Vista, but its system requirements are still higher than XP's. HD video has become much more common online but the vast majority of Atom netbooks can't handle it smoothly, and future versions of Internet Explorer will utilize 2D hardware acceleration, which the GMA 950 doesn't support.

We predict that Atom sales will increase again once Intel introduces its upcoming dual-core netbook model and could surge after the introduction of AMD's Bobcat in 2011, provided that processor can match or approximate Atom's power consumption. Unlike Intel, AMD doesn't need to worry about cannibalizing higher-end sales with netbook products; AMD's share of the mobile market is low enough that any gain—even in the low-profit netbook segment—will boost the company's bottom line.

The other pertinent factor is that netbooks, for all their popularity, are just one type of device. Intel has stated that its seen no corporate market for the diminutive systems as of yet, but there are a number of professional fields that could benefit from low-cost, light, multi-touch capable tablets, particularly tablets with a bit more horsepower than what Atom currently offers. Intel's "Atom Everywhere" strategy is all about fitting Atom into devices at every price and form factor—netbooks, even if they have reached saturation point, were never more than the first step in Atom's development.

Via:  CNET

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