Scan the dyslexicon of products targeting the territory between laptops and mobile phones--e-books, mini-notebooks, mobile Internet devices, netbooks, smartbooks, smartphones, tablet PCs and tomorrow's cloudbooks--and you understand why consumers are confused.
They're not the only ones. Practiced market watchers admit to having been caught unaware by the netbook's popularity, for example, as consumers took to the products with an enthusiasm that even the leading PC companies failed to foresee.
Some of the product introductions represent truly new categories triggered by legitimate innovations; others boil down to distinctive marketing. Understanding the emerging products and the segments they target is critical for OEMs as they hone their designs, pricing schemes and marketing messages, but that's no easy task when the market is in flux.
|Smartbooks and MIDs could still 'upset the apple cart'.|
Nokia is a case in point. The world's largest mobile handset vendor is coming at the market from opposing ends with two recent introductions: the PC-like Booklet 3G netbook, running Windows 7 and Intel's 1.6-GHz Atom Z530, and the N900, a smartphone-like smartbook running Nokia's own Maemo 5 on Texas Instruments' Omap 3.
But the company's market-straddling strategy looks like a misstep to Jim McGregor, chief technology strategist at In-Stat. Nokia's netbook pricing, for one, has been "clueless," McGregor said: The Booklet 3G comes in at more than $800, whereas prevailing prices in the category range from $300 to $500.
Nokia hasn't been the only victim of the market's moving targets, nor will it likely be the last. As more companies in search of double-digit growth opportunities stake out turf, expect more new product categories to litter the landscape.
In 2007, when Intel Corp. introduced a prototype "mobile Internet device," the concept of a multimedia-capable, always-on handheld with wireless Internet access captivated many, including Intel's competitors. Some predicted MIDs would topple the longstanding Wintel hegemony in PCs, with ARM battling Intel to become the CPU platform of choice for the new device category.
But that CPU fight never really escalated beyond a war of words. Microsoft, meanwhile, fended off Linux by aggressively cutting the price of Windows. And netbooks, not MIDs, became the next big thing, at prices so low that some analysts see them reshaping the fundamental economics of the PC business.
New players, including Asus and Micro Star International--virtually unknown to users just two years ago--are competing head-to-head with the likes of Samsung and Hewlett-Packard in the global netbook market, observed Will Strauss, president of Forward Concepts. "HP is not the No. 1 netbook company, although they are the No. 1 PC maker," Strauss said.
|How will the mobile device shipment mix change over time?|
Consumers are snatching up $300 netbooks as secondary machines to their mobile phones. They use the netbook's mobile Internet capability for updating Facebook pages, watching YouTube videos, surfing the Web and handling e-mail.
And while the PC market has long been driven by consumers' seemingly unquenchable desire for faster CPUs, bigger memory capacity and larger screens, in the netbook space consumers appear to be satisfied with "good enough." That's disturbing to incumbent computer companies accustomed to selling $1,500 notebooks. Many ignored, or failed to see, the pent-up demand for cheaper, mobile PCs that could offer longer battery life and instant-on connectivity.
Jeff Orr, senior analyst at ABI Research, today acknowledges that he misread the market. "I saw the future in MID," he said, "while I put a question mark to netbooks." In 2008, according to ABI, the industry sold 15 million netbooks, compared with some 30,000 MID units.
Ramesh Iyer, director of business development for mobile computing at Texas Instruments, called the netbook "nothing but a low-cost laptop running big Windows" on an un- remarkable but familiar platform. Most netbooks are based on Windows XP and Intel's Atom (or Advanced Micro Devices' dual-core Athlon, combined with ATI's Radeon or Nvidia's ION for graphics)--hardly a technological breakthrough.
Indeed, the computer industry is already shifting its attention from netbooks to Google's new Chrome operating system, designed to leverage cloud computing applications and services. EE Times editor-at-large Rick Merritt calls the cloudbook the true game changer (see page 24).
"Cloud is a wild card," said In-Stat's McGregor. Even Microsoft is talking about moving some of its Office applications into the cloud. Such a move, he said, could "take the emphasis off the operating system," launching a genuine computer revolution.
As product and market segments blur, a 'magical equation of device, service and application' grows ever more desirable.
Click on image to enlarge.
Chip vendors like Freescale and TI are enthusiastic about Chrome. "The power and brand of Google is a good thing," said Glen Burchers, consumer segment marketing director for Freescale Semiconductor. He noted that Freescale's hardware is already in Google's labs.
TI's Iyer called cloud computing "a holy grail" for an industry hoping to break the "$100 retail price barrier" for a host of new devices. Providers of devices ranging from printers to computers are jockeying to leverage services in the cloud.
Pundits agree that 2010 will be a test year for Chrome. The more pressing issue is "how netbooks will evolve" over the next few years, said In-Stat's McGregor.
On one hand, netbooks are getting thinner, packing more features and adding larger screens, further blurring the line between netbooks and laptops.
Consider Hewlett-Packard's Pavilion dv2z, a 1-inch-thick netbook with a 12-inch screen, said McGregor. Priced at $699.99, it's a high-performance, fully featured machine powered by AMD's Athlon Neo chip. Lenovo's 12.1-inch IdeaPad S12, featuring Nvidia's Ion technology, follows suit.
Other netbooks are morphing into "smartbooks," a neologism picked up and heavily promoted by Freescale and Qualcomm. Smartbooks often feature a 5 to 7-inch screen; are powered by an ARM processor; and come in a variety of form factors, including clamshells, tablets and smartphone-like handhelds. Some units come with thumb keyboards for easier typing while the user is standing, according to Freescale's Burchers.
ABI's Orr rejects the "smartbook" coinage, calling it "a brand, not a category." Smartbooks, in his view, fall under the MID product class.
A recent entry in the smartbook/MID class is Sharp Corp.'s NetWalker PC-Z1, a clamshell device with a 5-inch screen running Ubuntu Linux on Freescale's iMX515 processor. Archos International has launched a 5-inch Internet media tablet based on Google's Android running on TI's Omap 3.
Forward Concepts' Strauss called Toshiba's TG01, launched early this year, "the first smartbook on the street." The device has a 4.1-inch screen and is based on Qualcomm's Snapdragon and Windows Mobile. Nokia's N900 similarly packs all of the features commonly attributed to smartbooks but features an even smaller, 3.5-inch screen. Strauss called the TG01 and N900 crossovers "between the smartphone and smartbook."
Freescale's Burchers acknowledged that "both MIDs and smartbooks target similar functionalities" but added that "we purposely stayed away" from using the MID label because early MIDs--including devices from Compal and Casio that were shown at last year's Intel Developer Forum--flopped. "They were power hungry and built in a clunky form factor. Some even had a fan inside."
But Burchers has a clear vision for smartbooks' future: He sees momentum building around 7-inch tablets. Screen size is important, he said, because "more than 30 minutes of Internet surfing on a small screen like the iPhone will get taxing to consumers."
Burchers expects smartbooks to offer many multimedia features, because "two-thirds of Internet usage by today's consumers is all about entertainment, or extracurricular activities, such as YouTube and Facebook."
Connectivity is critical for smartbooks, but constant 3G connectivity, which involves a monthly fee by carriers, may not be necessary. Eighty percent of users surveyed are happy with Wi-Fi only, Burchers said. Forward Concepts' Strauss estimated that 3G cellular capability could boost the hardware by $100.
According to Forward Concepts, of the 165 million notebooks, netbooks and smartbooks/MIDs expected to ship in 2010, 79.4 percent will be notebooks, 17 percent will be netbooks and 3.6 percent will be smartbooks or MIDs.
Still, smartbooks and MIDs "can upset the apple cart," said ABI Research's Orr. Instant-on devices will flourish this Christmas, in 2010 and beyond as consumers seek products that meet specific budgets, lifestyles and work styles, he said.
ARM is ratcheting up processor development to serve this market, having recently unveiled a dual-core Cortex-A9 processor design, called the Osprey, that's billed as an Atom killer. Dual-core ARM-based products from Freescale, Samsung and TI are adding ammunition to the segment.
But In-Stat's forecast for the netbook/smartbook market by processor architecture indicates that a significant opportunity for the ARM architecture won't emerge for a few years. While ARM's share in 2009 is only 0.2 percent (the rest goes to the X86), In-Stat predicts it will grow to 24.9 percent by 2013, with 75.1 percent held by the X86.
The growth outlook for any new product class ultimately hinges on how well it serves a given usage model.
In-Stat's McGregor said that "software needs to become more robust" for smartbooks. Freescale's Burchers agreed, noting that Ubuntu, a popular Linux OS used in smartbooks, is reminiscent of desktop Windows.
"Smartbooks need a user interface that shows complete functionalities, such as social networking, movie players and entertainment apps," Burchers said.
Product positioning--literally--is also critical in the retail space. Smartbooks "shouldn't be sold in the same [physical location in the store] as PCs," said Burchers. "They should be among e-books, portable navigation devices and iPods."
As product definitions and market segments further blur in the nascent market, some common thread becomes ever more desirable.
OEMs know, said In-Stat's McGregor, that Apple found "a magical equation of device, service and application" in the iPhone, iTouch and related products. Amazon did the same with its Kindle 2.
Hardware is just one part of the battle. Every vendor is struggling to find a way to connect its own devices with the best services, applications and carriers. After all, they aren't selling computers, but connected Internet devices--truly a sea change from the traditional PC business.
See also: Inside the Google cloudbook