A nonprofit group said on Tuesday production of a new laptop computer for children in developing countries had begun, a milestone that could shake up the PC industry by ushering in a new era of low-cost computing.

The One Laptop per Child Foundation, started in 2005 by Massachusetts Institute of Technology professor Nicholas Negroponte, said Taiwan's Quanta Computer had started mass production of its first product, the lime-green-and-white XO laptop computer, at a factory in Changshu, China.

The group has already announced orders for children in Uruguay and Mongolia. It also plans to offer the laptops to Americans and Canadians through a $399 holiday charity program that covers the cost of providing a second machine to a child overseas.

The device, which runs on free Linux software, has already had a significant impact on the industry.

Negroponte has traveled the globe meeting world leaders and talking to the public about speeding introduction of computers to children in the developing world. The XO is designed for elementary school students who are given the machines to take to and from school, like textbooks.

Analysts say the publicity he generated, along with concern his foundation's laptop might take business from commercial products, prompted companies, including chipmaker Intel Corp and software maker Microsoft Corp, to boost investment in developing countries.

It has also spurred the launch of a new class of low-cost computers for a market broader than school children.

Intel has developed the Classmate PC for the education market in developing countries, a laptop that it says costs $200 to build. So far its biggest customer is Pakistan's Allama Iqbal Open University, which ordered 700,000 of them.

Taiwan's Asustek Computer Inc recently introduced a line of notebook computers, the Eee PCs, that retail for as little as $245 in some countries and are targeted at children and women.

On Friday, Wal-Mart Stores Inc offered a limited number of laptops from Acer Inc for $348. It is possible that Wal-Mart might repeat the promotion or that other retailers will offer similar deals during the holiday shopping season.

(Editing by Jason Szep, Tim Dobbyn)