Sayonara,
netbooks.
The end of 2012 marks the end of the manufacture of the diddy machines
that were - for a time - the Great White Hope of the PC market.
If
you believed ABI Research in 2009, then next year netbooks (initially
defined as machines with Intel Atom processors and screens less than
10in diagonally - though the definition became fuzzier over time) will
sell 139m. (The original ABI press release with the forecast,
linked from the Wikipedia page on netbooks, and still there until May 2011, has
disappeared.
But you can get a flavour of its optimism from the URL of the press
release (which contains the phrase "an era begins") and the
research paper it was offering in late 2010 which had forecasts for netbook sales through to 2015 and the names of 23 vendors (including - quiz question - Nokia.)
Still, there's an
eWeek article
from July in which ABI says that "consumer interest in netbooks shows
no sign of waning, and the attraction remains the same: value rather
than raw performance."
Actually, the number sold in 2013 will be very much closer to zero than to 139m. The Taiwanese tech site Digitimes
points out
that Asus, which kicked off the modern netbook category with its Eee PC
in 2007, has announced that it won't make its Eee PC product after
today, and that Acer doesn't plan to make any more; which means that
"the netbook market will officially end after the two vendors finish
digesting their remaining inventories."
Asustek and Acer were the
only two companies still making netbooks, with everyone else who had
made them (including Samsung, HP and Dell) having shifted to tablets.
Asustek and Acer were principally aiming at southeast Asia and South
America - but of course those are now targets for smartphones and cheap
Android tablets.
That's something of a turnround for Acer, which in September was
still insisting that it would "continue to make netbooks", even though Lenovo, Dell and Asustek had all withdrawn.
Intel,
which made its Atom processor with the intent of aiming at lower-cost,
lower-power, longer-battery-life PCs, is still going to keep making the
Atom; those will be pushed into the embedded market for point-of-sale
applications.
What killed the netbook?
There are four
candidates: the rest of the PC market (including the arrival of
ultrabooks); the economy; the economics of netbooks; and the iPad plus
the attendant rise of tablets.
The rest of the PC market
Looking
at the rest of the PC market first: the writing has been on the wall
for a while. Even in May 2009, when netbooks were just two years old
(and the iPad wasn't even a rumour), Jack Schofield was
asking whether netbooks were losing their shine, pointing out that
US-based
DisplaySearch indicates that while first quarter netbook sales were up
by 556% compared with the same quarter last year, they were down by 26%
sequentially, compared with the fourth quarter of 2008. Notebook sales
declined 24% sequentially, so netbook shipments are no longer growing
against the market trend.
As he also pointed out
then, a key factor in that slowdown was that Linux didn't work well as
an OS for users who were expecting to run PC software - which meant that
Windows XP had to be pressed into the task. But that meant cleaving to
Microsoft's demands:
"the increase in specifications
that has pushed up netbook prices. The classic netbook was cheaper than a
notebook because it had a 7-inch screen, a small Flash drive, an Intel
Atom processor, and used Linux instead of Microsoft's Windows Vista.
Today's netbooks have 10- or 12-inch screens, 160MB hard drives, and run
Windows XP. It is still cheaper to make a netbook than a notebook, but
the gap has narrowed."
The promise of the netbook was
that it would be more portable, have longer battery life, and run all
the software you needed. With the overall PC market shifting towards
more and more replacements, the netbook arrived at the right time to
create a "first-time" market - of people buying a machine purely for its
portability and/or battery life.
There wasn't anything to compete
directly with netbooks on price. But other lower-end notebooks could
offer bigger screens and more storage. The price delta became thinner
and thinner, and as battery life improved on cheaper notebooks, it
became harder to justify scrimping and just buying a netbook.
So the availability of laptops that cost less than previously was certainly a factor.
The
suggestion that ultrabooks - very thin, light laptops - killed the
netbook doesn't make sense, since ultrabooks have barely made any impact
on the laptop market, let alone the wider PC market. But Apple's
introduction of an 11in MacBook Air in late 2010 (no optical drive,
solid-state storage) at $999 showed the PC industry that there was
definitely money to be made at the higher end. That's what kicked off
the ultrabook scheme, even though it hasn't yet repaid the investment.
The MacBook Air probably didn't take any sales away from netbooks - the
price difference would see to that - but it did point out to PC
manufacturers struggling to make a margin that cheaper wasn't actually
the way to go.
The economy
The global economy cratered
just as netbooks were beginning to take off. Remember the credit crunch
of 2008, and how the banks nearly failed? From Q4 2008, the PC market
saw three quarters in which shipments shrank. But those were followed
from Q4 2009 by three quarters of growth above 20% (because the
comparison with shrinking growth always looks good). And PC sales were,
in the past, tied to the economy; when it grew, they grew, roughly in
line.
Even so, netbook shipments grew strongly from 2008 to 2009. The slowdown hit in 2010: early that year, sales "took a nosedive",
IDC's David Daoud told PCWorld,
falling from over 2m in Q1 2010 to only just over 1.5m by the end of
the year. By the fourth quarter of 2011, US netbook sales had fallen to
about 750,000.
US netbook sales Q1 2010 - Q4 2011. Source: IDC
A similar trend was reflected worldwide, with Q1 2010 shipments of 9m
dropping to about 6.2m by Q4 2011. But that's the quarter in which
overall PC sales rose by more than 20%. Clearly, the economy didn't do
it.
The economics of netbooks
This is a different matter
to the world economy, though. What's the key thing about netbooks? That
they are (or were) cheap - the Eee PC started (in its Linux incarnation)
as a $199 product.
The trouble with that sort of pricing,
though, is that it leaves very little margin. Especially once netbooks
all began running Windows XP, where the licence could cost anything from
$30 upwards per unit, and more like $50 per unit for Windows 7, there
just wasn't much room left for the manufacturer to make a profit.
And
besides that, just as pundits thought netbooks were looking forward to a
grand time, other things happened. PC manufacturers needed better
margins (because of the Windows 7 pricing squeeze, and a market that was
slowing and shifting further to laptops). And then Apple announced the
iPad.
The iPad and all the tablets
In January 2010, Apple
announced the iPad. In April 2010, it went on sale. By mid-2010, a host
of other companies were announcing their own tablets (running Android).
Suddenly tablets were the hot thing in the
computing market, and the netbook looked a bit like, well, last year's thing.
It's
notable that the first area where netbook sales began falling was the
US market, where the iPad first had its big success. The irony is that
the iPad cost more than a netbook, and arguably does less: you can't run
Office on it, nor your favourite Windows app. But it did have better
portability than a netbook, and much better battery life (some netbooks
on sale in 2009 were
only getting three hours
- no different from pricier laptops). And like the netbook it had no
optical drive, and limited storage, meaning that cloud services were
key.
By February this year,
it was clear that the netbook was done.
And here is the killer stat: shipments of tablets in 2011 overtook
those of netbooks - 63m against 29.4m. (The year before it had been the
other way around, at 23m v 39.4m; but that was the first year of
"modern" tablets.)
And for 2012, tablet shipments are forecast to
hit 122.3m (according to IDC's latest forecast, made in December).
Netbooks, meanwhile, don't seem to have troubled the forecasters this
year. And for 2013? IDC reckons tablet shipments will hit 172m. And we
know what the figure will be for netbooks - zero (apart from inventories
being cleared).
Conclusion
Netbooks had a short but
interesting life - going from the one-time saviour of the PC industry,
to just another mispriced attempt to push some low-powered Intel chips
and garner more money for Microsoft.
But the squeeze on pricing,
plus the fact that Windows licences aren't free, meant that they got
pushed into a tiny niche: worse specifications than slightly pricier
laptops, no margin for the manufacturers, and worse battery life and
portability than the burgeoning number of tablets with custom apps.
The
questions that do remain is what's going to happen to the various
government contracts in countries such as Greece and Malaysia to equip
schools with netbooks - or whether those contracts have finished, or
been discontinued.
What, too, about the
One Laptop Per Child (OLPC) project?
Essentially, it's trying to get netbook-like devices to classrooms in
developing countries. There hasn't been much news of huge wins this
year, though, going by its
end-of-year blogpost. Perhaps it will function independently of the death of consumer netbooks.
So farewell, netbooks. It was nice knowing you, but ultimately, you were just another PC.
