Netbook growth seen slowing when economy recovers

SAN FRANCISCO—Netbook shipments grew by more than 2,000 percent last year and are expected to grow another 68.5 percent in 2009, but this explosive growth is likely to slow as the economy rebounds beginning in 2010, an analyst said Thursday (April 30).

Growth in netbook shipments is projected to slow to 39.6 percent in 2010 and continue to decelerate to 13.1 percent by 2013, according to Matthew Wilkins, principal analyst for compute platforms, at market research firm iSuppli Corp.

"People are not buying netbooks because they are truly desirable platforms, but rather because as low-cost PCs, they offer a good mix of features at an acceptable price point," Wilkins said in a statement. The growth of netbooks is likely to slow "when the economy comes back and consumers have more money in their pockets," Wilkins said.

Netbook are mobile PCs priced at less than $600 with a fully-functional operating systems, including local storage, a keyboard and wireless connectivity, according to iSuppli's definition.

According it iSuppli (El Segundo, Calif.), much of the growth of netbooks has come at the expense other PC categories, particularly desktops. Global desktop PC shipments are expected to drop by 9.5 percent in 2009, according to the firm's most recent forecast.

But while desktop shipments are set to continue to decrease during the following years, the rate of decline will slow as consumers regain their purchasing power, iSuppli predicted.

When the economy does recover, netbook brands may be tempted to add features to boost performance, but Wilkins cautioned netbook makers to be careful to keep the costs of their platforms down.

"Netbooks are inherently inexpensive platforms that sacrifice performance and bells and whistles to achieve low pricing," Wilkins said. "While netbook capabilities and performance will inexorably rise in the coming years, the more powerful they become, the more threatening they become to regular notebook models—through comparable performance but lower price."

Intel Corp. is upgrading its netbook PC silicon platform to support high-definition video playback and netbook display sizes are moving to the 10-inch range, up from 7- and 8.9-inches, iSuppli said. Graphics chip vendor Nvidia has offered its Ion platform, using a GeForce 9400M chipset along with Intel's Atom processor, as a solution that increases the graphics performance of the netbook platform.

"Some of these high-tech features that increase netbook performance are questionable," Wilkins said.

The rise of the netbook market has come as boon to PC microprocessor suppliers, particularly Intel, iSuppli said Atom is clearly not a performance-orientated processor, and yet due to the ramp in netbook shipments is having an impact on company revenues, the firm said.

Some analysts, including Robert Castellano of The Information Network, have theorized that Intel's Atom and the rise in prominence of netbooks have hurt the No 1 chip vendor's bottom line by cannibalizing the market for its more expensive notebook processors.

ISuppli is offering for sale through its website a report on netbooks titled Netbooks and Emerging Form Factors: PC Saviors?