Emerging markets keep netbooks relevant, but barely

Consumers in markets such as Indonesia and the Philippines will continue to buy netbooks as their first PC, but more capable and cost-effective alternatives and the upcoming Windows 8 OS signal netbooks' death knell.
Written by Ryan Huang, Contributor

Netbooks face a bleak future as hardware makers shift their focus from this device category to concentrate on other form factors, while the upcoming Windows 8 operating system (OS) threatens to make netbooks obsolete. Even interest from certain emerging markets may not save it from irrelevance in the long run.

The outlook for netbooks was rosier during 2007, when it was positioned as a small, lightweight and affordable alternative to the traditional, chunky laptops. Five years on, however, and one of the pioneers of the segment, Asus Technology, has announced it will pull the plug on manufacturing netbooks. Other players such as Toshiba and Dell have also indicated likewise.

An Asus spokesperson told ZDNet Asia that while the company still sees demand for the product, it decided to focus elsewhere as it expects consumers to move toward tablets, convertibles and other devices.

"Tablets can now replace the functionality of netbooks, and the trend is toward touchscreen capabilities currently," said the spokesperson, who added Asus' production of netbooks would stop in 2013.

Gradually phased out
Agreeing, Tang Pin-chen, research analyst at Canalys, noted there was still potential in emerging markets, where consumers needed a cheap PC or a basic notebook.  However, even then, he pointed out growth in the category has been on a downward trend.

The research firm found that netbooks currently constituted about 5 percent of global PC shipments, which is a 13-percent dip from two years ago. There were 29.4 million devices shipped in 2011, a drop of 25 percent from the previous year, it stated.

Andi Handoko, senior market analyst for client devices research at IDC Asia-Pacific, added netbooks have been steadily losing market share in Asia despite certain emerging markets still maintaining interest, such as Indonesia and the Philippines, where netbooks remained popular among first-time PC buyers.

"The erosion is inevitable due to the growing affordability of the other devices and the fact that availability is getting less in the market with only a handful of PC vendors still selling netbooks in the market," said Handoko.

In terms of more competitive pricing to regain market share, the analyst said it would be very unlikely for netbooks to compete on price and did not see them drop any lower. "[Rather,] we're seeing the few remaining PC vendors that still offer netbooks diverting their existing customers to entry-level notebook models," Handoko stated.

He elaborated PC vendors may carry the legacy brands of a netbook category, such as Acer Aspire One or Asus EEE PC, and keep certain hardware specifications such as screen sizes 12 inches and below, but in reality these "netbooks" will be fitted with processors resembling that of traditional notebooks.

Acer is one PC vendor which still believes in the future of netbooks though, and is bucking the trend by vowing to continue manufacturing such devices. An Acer spokesperson told ZDNet Asia that, by definition, a netbook is required to use Microsoft's basic, or starter, OS.

"Although the basic OS version will no longer be available with Windows 8, Acer will still remain in the netbook segment with various products," she said.

Windows 8 another nail in coffin
On the arrival of Windows 8, the Asus spokesperson said there was already little future for netbooks due to the platform's limited room for innovation and Microsoft's touch-enabled OS will only further highlight the device's shortcomings when it hits the market later this month.

Tang concurred, saying the introduction of Windows 8 will make netbooks even more irrelevant. One potential issue would be the compromised user experience with the netbook's limited screen resolution--typically 1,024 x 600 pixels. This means users may not be able to run apps built for Windows 8 devices powered by ARM chips, also known as WinRT, or take full advantage of the revamped Windows 8 interface.

The absence of touchscreen capability would also make netbooks relatively outdated, the analyst added.

According to IDC's Handoko, vendors will likely bet on their existing and future notebooks and other form factors to be powered by new generation processors and Windows 8. He added these stable of devices would include ultra-slim notebooks, including ultrabooks, and the upcoming touch-enabled notebooks, which will gradually push customers to migrate from netbooks.

Consumers ZDNet Asia spoke with were also reluctant to consider purchasing a netbook.

For one, Singapore-based sales executive Brain Ang, believed netbooks were unattractive not only on price points compared with other devices but carrying one would make him seem "outdated".

Malaysia-based student Marilyn Goh, added tablet computers were more convenient for her lifestyle now, as it would be easier to use on public transport. "Why would I want to buy a netbook, when a convertible will probably be a better investment?" Goh said.

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