Summary
The netbook market has emerged with great fanfare as PC manufacturers and even mobile operators are looking to this device category to spur growth. Netbooks, while appealing in emerging markets, will face the difficult hurdle of creating a position between laptops and smartphones in developed markets in order to succeed.
Analysis
Netbooks, mini laptops, mini-note PCs, smartbooks, mobile Internet devices - this loosely defined industry sub-segment, if nothing else, suffers from inexact and confusing nomenclature. For the sake of discussion, let’s make the simplifying assumption that the netbooks category encompasses laptop-like devices that sit between smartphones (with screen sizes less than four inches / 10 cm) and notebook computers (with screen sizes greater than 10 inches / 25 cm).
PC manufacturers, such as Hewlett-Packard, Dell, Acer, Lenovo, Toshiba and netbook-pioneer Asus, are continually trying to find the magic balance of size, cost and performance, and have created a new market segment with netbooks. The last major PC industry shift came a couple decades ago when laptops gained popularity and provided portability, which came at price premium and performance discount to desktops. Now with netbook PCs, the tradeoff vis-à-vis laptops is smaller devices at a lower cost but with less power.
In evaluating the potential success of this new segment there are several factors to consider, such as cost (including, where relevant, subsidy), form factor (e.g., screen size, overall dimensions), battery life, principal use (e.g., media / entertainment, Internet access, productivity, communications), and whether the device is the primary, secondary or even tertiary connectivity device in the household.
Emerging markets are a good fit for netbooks and other relatively inexpensive connectivity and entertainment devices. When a netbook is a household’s first computer or purchasing a traditional laptop or PC would strain the family or organization’s budget, then netbooks have significant appeal. As notebook PCs and smartphones become increasingly popular (especially outside of emerging markets), however, squeezing in a netbook, which replicates several major functions and may require an additional purchase, subscription and charging / maintenance, can be difficult.
In developed markets, especially as a primary device, netbooks will have trouble displacing laptops or smartphones as a netbook can’t compete with a phone’s portability and necessity, and a laptop’s performance. Therefore, in order to thrive in developed regions, netbook manufacturers and their channel partners, such as mobile operators, face the challenge of creating a market for netbooks as an auxiliary but highly valuable entertainment, communication and connectivity tool.
Tal Raeside consults with leading institutions through GLG
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
