News analysis: PC industry fears netbooks may hurt laptop sales

IDG News Service - Advanced Micro Devices Inc. has no immediate plans to release a processor designed for low-cost laptops, sometimes called netbooks, saying it's not yet clear whether growing shipments of such devices will cannibalize sales of mainstream laptops.

Some low-end netbook models use an existing AMD Geode processor, but the company hasn't announced a specific processor aimed at this product segment, apart from general plans to release chips based on a low-power architecture called Bobcat in 2010.

"We haven't announced anything for this type of cheap mini-notebook, and we're still taking this wait-and-see attitude," said Pat Moorhead, AMD's vice president of advanced marketing.

"The fact that there are a number of models coming out might give the indication that [the market is] growing and everybody wants to do this, but what's interesting is you pull back the covers and talk to people in the industry, and they're kind of scared," he said.

That fear stems from a concern that netbook sales will undermine sales of more powerful machines.

"If you can't grow the market with this form factor, then what you're providing is a lower experience for less money, which isn't good for the consumer and isn't good for the [hardware maker], and really isn't good for the channel as well," Moorhead said.

Other companies and analysts are also worried, in part because of the popularity of the mini-laptops.

The recent proliferation of netbooks is largely due to the success of Asustek Computer Inc.'s Intel Celeron M-based Eee PC, which was introduced in 2007. The June unveiling of Intel's Atom processor, designed expressly for small, inexpensive laptops, spurred the release of a host of copycat devices by hardware makers looking to replicate the Eee PC's success.

As demand and the number of available systems increases, netbooks are drifting further from the original vision for these products as small and inexpensive portable computers. Screen sizes have increased, from the 7-in. screen of the original Eee PC to 10-in. displays on some models, and Windows XP is now an option, replacing Linux as the operating system of choice. Prices have risen accordingly.

The original price of the Eee PC was supposed to be $199, but the devices actually cost $250 or more when they hit the market. Now, an Eee PC 1000H with a 10-in. screen, 1.6-GHz Atom processor, Windows XP and an 80GB hard disk goes for around $600 — more than the price of some mainstream laptops with more generous specifications, including Dell Inc.'s Vostro 1000 series.

Nevertheless, demand for netbooks appears robust. Asustek — a bellwether for the netbook market — last week pared its shipment forecast for mainstream laptops but said demand for the Eee PC remained strong.