End in sight for Intel's Atom netbook-specific processors

Analysts say that Atom netbook chips may be replaced by an upcoming tablet-optimized Atom chip

Intel's Atom processors designed for netbooks could be on their last leg, with analysts saying that the chip maker could be tweaking its product road map as PC sales tumble and tablet adoption widens.

Intel's most recent Atom processor targeted at netbooks, code-named Cedar Trail, may not be refreshed to its latest generation, analysts said. Netbooks are being kicked to the curb after a few years of success and Intel may be looking at an upcoming tablet-optimized Atom processor code-named Bay Trail to replace the specialized netbook chips, they said.

The chip maker had previously painted Bay Trail as a processor for tablets. But at the Intel Developer Forum in Beijing this week, the company said it is expanding the chip to sub-$599 convertibles, laptops and desktops.

Netbooks are low-priced, lightweight laptops designed for basic computing, with screen sizes up to about 12 inches and prices under $350. But as features such as touchscreens come to more laptops, analysts said there is a need for manufacturers to move away from underwhelming netbook chips.

"The market is clearly indicating stronger products for mainstream computing. That kind of pushes Atom to the fringes," said Dean McCarron, principal analyst at Mercury Research.

The Bay Trail chip is based on the new Silvermont architecture, and will succeed the Atom tablet chip code-named Clover Trail. Clover Trail is already in hybrid laptop-tablet devices such as Hewlett-Packard's Envy X2, but the devices are largely priced above $599. With Bay Trail, laptop makers will have the option to offer less expensive products.

Intel declined to comment on whether Cedar Trail would be refreshed. But the Bay Trail processor is being offered for mobile and desktop products and will meet the needs of buyers looking for value products, a company spokeswoman said.

Intel's Atom chips got a commercial start in netbooks in 2008. Since then, the company had a dedicated netbook chip lineup, with updates in late 2009 and late 2011. Intel has developed separate Atom chips for smartphones, tablets and servers, but the lines are blurring as features such as touchscreens and always-on connectivity reach laptops.

Intel pitched netbooks as companion devices and they enjoyed a few years of success, despite criticism. In 2009, Apple's Tim Cook, then the chief operating officer, described netbooks as having "cramped keyboards, terrible software, junky hardware, very small screens, and just not a consumer experience."

The market for netbooks with Atom peaked in the fourth quarter of 2009, with shipments at the time totaling 12 million units per quarter, which dropped to about 3 million in the first quarter of 2013, according to research by Mercury Research. Netbook shipments started declining in 2010, the same year Apple introduced the iPad tablet. Since then, netbook users have increasingly moved to tablets, and apart from Acer and Asus, PC makers including Dell and Lenovo have pulled Atom-based netbooks off the market.

Slow netbook sales were partly responsible for the 13.9% year-over-year fall in PC shipments during the first quarter this year, IDC said this week. Netbooks are now a small niche market with an audience in developing countries, said David Daoud, research director at IDC.

Intel is likely to replace its netbook processor lineup with the Bay Trail chip or the low-end Celeron chip, which is for entry-level laptops, said Jim McGregor, principal analyst at Tirias Research.

"I would expect they are not going to announce another netbook processor," McGregor said.

Netbooks were an artificial market created partly by the global economic crisis, and the low-cost laptops resonated well with price-conscious buyers, McGregor said. But over time, weaknesses in netbooks -- slow performance, cramped keyboards and small screens -- were exposed.

"Users want a tablet or a more fully functional notebook," McGregor said, adding that an entry-level laptop with more features costs just a few dollars more.

PC designs are also changing, and Intel is trying to put the term "netbook" in the past, McGregor said. For a product like Bay Trail, Intel "will not call it a netbook processor," McGregor said.

If users want $250 computing devices, they can buy Chromebooks, which come with ARM or Intel's Celeron processor, or cheap Android tablets, said Mercury Research's McCarron.

Low-cost Android tablets are available with ARM or Intel's Atom smartphone processor variant code-named Lexington. Chromebooks start at $199. Also, the Windows 8 OS does not work on the latest Cedar Trail netbook chip.

Intel is trying to keep up with the times and future Atom chips like Bay Trail could perhaps be a natural successor to the company's netbook chips.

"It's a transition phase, give it some time and let the economics of scale come into play. We'll see some kind of stronger improvement of these devices," McCarron said.

But as Atom netbook chips fade away, the category is being taken over by Advanced Micro Devices' Brazos chip, which is closely related to markets that netbooks played in, McCarron said. The Brazos chips have sold well through products like HP's Pavilion DM1Z laptop, which has an 11.6-inch screen.

"There's a battle that's breaking out there," McCarron said.

Atom processors are also in smartphones, tablets and servers. Atom chips are also selling well in embedded devices.

Agam Shah covers PCs, tablets, servers, chips and semiconductors for IDG News Service. Follow Agam on Twitter at @agamsh. Agam's e-mail address is agam_shah@idg.com

Copyright © 2013 IDG Communications, Inc.

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