Netbook craze sparks rethink by PC makers

by May Masangkay

Kyodo News

Smaller and low-cost notebook personal computers with limited functions, now known as netbooks, are fast becoming a favorite among users worldwide who simply want a low-cost lightweight PC to browse the Web and handle e-mail.

With Sony Corp. releasing one this month, netbooks have now been embraced by major Japanese PC makers including Toshiba Corp., NEC Corp. and Fujitsu Ltd.

As of June, netbooks accounted for 33.1 percent of the total market share in terms of notebook computer sales, compared with 6.6 percent a year earlier when netbooks began entering the market, according to data by Tokyo-based market research firm BCN Inc.

Toshiba, the first to break into the netbook market among Japanese PC makers, rolled out in October 2008 its NB 100 with an Intel Atom processor and 8.9-inch display screen.

This was eventually upgraded to the 1-kg, 10.1-inch screen Dynabook UX netbooks, released in June. They have been well-received so far, presenting a viable rival to the earlier Taiwan-made Acer and Asus and U.S.-made Dell netbooks.

“As a manufacturer known for having been long engaged in notebook PCs, we wanted to be the first among domestic manufacturers to take the first step in line with our policy of offering our customers a full lineup of all types of computers available,” said Fuminori Sugino, chief specialist at Toshiba’s PC marketing department.

With no clear-cut definition and the only difference being the firms’ brand, design and marketing strategy, netbooks are characterized among PC makers and industry analysts as low-priced mobile computers with a screen size of up to 12.1 inches that have a low-voltage CPU, such as the Intel Atom, and offer mainly Web-browsing and e-mail functions.

“Thanks to netbooks, we were able to capture people who normally do not use computers, and from this vantage point, netbooks are playing a major role in expanding our PC market to a wider customer base,” said Satoshi Kushiro, NEC’s group manager in charge of PC business.

These same users, Kushiro said, are likely to upgrade their PCs to high-performance models when they buy PCs the second time around.

A netbook is also a welcome product for cost-conscious consumers amid the global economic downturn, usually costing around ¥50,000, less than half the price of a regular notebook.

The recession and lower prices pushed the value of domestic PC shipments to less than ¥1 trillion for the first time in 14 years in fiscal 2008, according to the most recent data from the Japan Electronics and Information Technology Industries Association. But the data also showed that in unit terms, shipments slumped 5.5 percent to 8.79 million machines in fiscal 2008, of which notebooks accounted for a record high 67.8 percent.

Netbooks, though, are also a cause of worry for the PC industry due to fears they could trigger an all-too-easy price war.

“The emergence of netbooks is a big matter as it is greatly changing the computer market structure and pushing PC makers to rethink their strategy by selling netbooks and notebooks to their respective target users as the lower prices of netbooks are pushing down the average unit price,” said Ichiro Michikoshi, BCN’s senior PC analyst.

“If the prices become too cheap, it will eventually hurt their earnings and may affect their employees’ wages,” Michikoshi said, adding the popularity of cheap netbooks may decrease demand for high-performance notebooks.

Junji Tsuyuki, group public relations manager of Sony’s Vaio group, was also quick to point out the uncertain outlook for the netbook business.

“With netbooks accounting for around 30 percent of the market share, we could not pass up this business opportunity, but if you ask me if the netbook market will continue to expand, I do not know,” Tsuyuki said, adding that among determining factors will be various operating systems, including Windows 7, which will come out this fall.

Many are pinning hopes on Windows 7, the latest Windows operating system after the unpopular Vista, because the upcoming version is said to be more user-friendly and lighter to preinstall on netbooks, a development expected to influence the direction of netbooks.

With most PC makers and industry pundits agreeing netbooks are unprofitable, this will probably not change as long as sales are concentrated only in Japan and not targeted at bigger markets, including India and China, given the cutthroat competition from products that include the increasingly popular smart phones, which can handle many of the tasks of a PC.