Laptops an inch thick that multitask and edit multimedia content, but cost only $500? Intel and AMD are betting they aren't too good to be true.
The world's thinnest laptops, usually the province of executives and the well-heeled, may this year go mainstream thanks to cheaper but still-powerful processors from Advanced Micro Devices Inc and Intel Corp.
AMD got the ball rolling by enabling inexpensive thin laptops early this year. But Intel, with 80 percent of the processor market, may edge out its foe with its Consumer Ultra Low Voltage chip, or CULV, which promises longer battery life, computing power adequate for most, and a recession-friendly price.
The flip side? If the less-pricey ultra-thin form takes off, it may eat into revenue and profit for Intel's and AMD's blazing-fast high-end processors, analysts say.
It's a pretty substantial threat to pricing, said Endpoint Technologies analyst Roger Kay. Any amount of volume it picks up there is going to shift the mix downward.
AMD partnered with Hewlett-Packard Co in January to launch the Pavilion dv2. Intel launched its rival CULV chip this month and Acer Inc and Asustek Computer Inc were among those that demonstrated laptops based on the new technology at the Computex trade show in Taipei.
Their premise? With more people gravitating toward mobile and wireless technology, consumers want smaller laptops -- and most of those people would prefer doing more than surfing the Web, which the no-frills netbooks now excel at.
Most people would never need the unbridled processing power that advanced, larger processors offer, analysts say.
UBS analyst Uche Orji said corporations and gamers would use high-end chips but most consumers would go with Intel's CULV chip.
This becomes the core of consumer products, said Orji. Intel's has 30 percent more battery life. Intel's will get up to 8 hours and AMD's we think is up to 5 hours, so Intel has an edge there.
Intel's director of mobile platforms product marketing, Uday Marty, said the company expects 20 percent of its consumer shipments will be for ultra-thins by the end of 2009.
A POTENTIAL PROBLEM
The PC industry, still struggling to recover from one of its worst downturns ever, badly needs more growth drivers.
Acer, the first company to introduce a cheap Intel-powered CULV laptop, expects revenue from that segment to account for 15 percent of its total sales by the end of 2009.
Asustek, which pioneered the netbook in 2007, plans to launch five consumer-priced ultra-thins this year.
But analysts say a surge in this market may hurt already weak revenues for chip makers in the short run. Intel's Atom -- designed for netbooks -- siphoned sales from its pricier chips, a trend analysts say the CULV chip may sustain somewhat.
Atom-powered netbooks begin at around $300, but can cost much more for a designer model. The new ultra-thins cost as little as $500, while notebooks are twice that.
Analysts say chip margins, however, will stay much the same because costs have shrunk as makers fit more chips on a single wafer. Ultra-thins also cost less to make and lower power requires less in the way of cooling.
Analysts say product margins for CULV chips stand in the mid-60s, about the same as Intel's mainstream processors, and above margins for Atom processors, which are about 11 percentage points below average, according to analysts. It is a difficult thing for revenue and profit... People don't live by profit margin percentages, they live by profit dollars, IDC analyst Bob O'Donnell said. How do you make up for that shortfall? We think it's through the sale of value-added products such as software and accessories.
IDC does not have shipment forecasts for ultra-thins but is confident they will do well.
The stakes are rising. AMD in June launched a dual-core version of its ultra-thin chip and said it will launch a second generation of chips in the second half of the year that it says will nearly double the battery life of the first.
Some people are suggesting that AMD could step in and pick up some of Intel's market share, but I'm not too sure. AMD doesn't have the same range of chips that Intel has right now, and it's difficult for me to see how they can really change the current state of play, Daiwa Institute of Research analyst Pranab Sarmah said.
(Additional reporting by Kelvin Soh in Taipei; Editing by Edwin Chan and Tim Dobbyn)