Market Spotlight: Low-Cost Laptops

Few dispute that a market exists for low-cost laptops--sometimes known as "netbooks." The no-frills devices were thrust into the limelight at last week's influential Computex trade show in Taiwan, with new products introduced by Acer, MSI and AsusTek--maker of the Asus Eee, arguably the most popular low-cost laptop with prices starting at $300.

Also at Computex, No. 1 microprocessor maker Intel caused a stir with its new Atom processor targeted at low-cost laptops. Although Intel chips already power the Eee, Atom marked a startling wrinkle for a company generally known for developing chips to be faster, not cheaper.

Notably absent from the low-cost PC party at Computex was Advanced Micro Devices, Intel's closest rival. However, AMD did introduce a new line of chip packages for mainstream laptops. And its Geode chips already power the education-oriented XO-1, the so-called "$100 laptop" made by Quanta Computer. (Its list price is actually $199.)

Much of the buzz about the potential for low-cost PCs for emerging markets can be traced to One Laptop per Child, the high-profile nonprofit group that aims to distribute cheap educational laptops to children around the world, especially in developing nations.

One Laptop Per Child has achieved some success, shipping nearly 400,000 XO-1 laptops. Additionally, the group has orders for 700,000 more laptops and letters of credit for another 500,000. Pilot programs have involved schools in about 25 nations as far-flung as Mongolia and Nigeria.

However, the greater market opportunity for low-cost laptops likely exists in countries that are already technologically savvy, analysts say. The research firm IDC projects worldwide shipments of low-cost laptops will grow from fewer than 500,000 units last year to more than 9 million in 2012, with about 80 percent of shipments going to established markets.

But low-cost laptops will still pale in comparison to the overall PC market. About 264 million PCs were shipped worldwide last year, according to the research firm Gartner Inc.

"The industry likes to wrap itself around the next big hype, and this is it in 2008," said Pat Moorhead, vice president of advanced marketing at AMD. "Maybe it will take off, but for now we're kind of 'wait-and-see' on it."

Luis Anavitarte, vice president covering emerging markets for Gartner, insists that low-cost laptops have legs in developing nations.