Netbooks: Intel Wins, AMD Loses

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Netbooks continue to defy economic gravity to Intel’s benefit.

According to the market research outfit iSuppli, Intel’s global market share jumped to 80.6%, the largest share it’s enjoyed since the third quarter of 2005. AMD slumped to 11.5%, a decline of 1.3 percentage points compared to the preceding quarter, as shown in iSuppli’s table:

AMD pretty much dissed the whole netbook segment and basically blew it off, I guess feeling it was a fad and not worthy of their attention. Intel meanwhile embraced the category (perhaps somewhat at arm’s length at first) and its Atom low power CPUs became the “chip of choice” among manufacturers. Turns out Intel guessed right – as the segment took off (helped by a near-economic depression, among other factors), Intel sold LOTS of Atoms and reaped the reward. Even though desktop and server sales slumped badly, Intel did manage to increase share but only the Atom showed any positive growth.

Now it turns out that the telcos are having a love-fest with netbooks, offering them at attractive subsidized prices (albeit with high-margin data plans) to entice consumers to sign up to their networks. Just as ATT benefited handsomely from its iPhone tie-in, telcos are now hoping to strike pay-dirt again with netbooks as the come-on. Apparently now something like 50 cell companies are now into the netbook game – it’s beginning to look like a free-for-all as operators vie to tie-up products.

The increased marketing activity by cell companies has greatly enhanced the netbook’s viability among consumers, with netbooks climbing to about 14 million units for the first half of 2009, representing almost 23% of notebook sales compared to about 6% last year. What keeps manufacturers up at night is whether or not all this love will continue. While netbooks represent an important growth segment, margins are tight and price-compression among larger notebooks is giving manufacturers some serious heartburn.

Not so long ago a “typical” notebook tipped the scales at about a $1,000 price-point, whereas now a decent notebook with a 15″ screen is available at prices under $500. It may not be for power users, but for internet and utility apps, it works fine and does the job nicely.

Look for netbooks continuing to shake things up and impact notebook pricing to the consumer’s advantage. I still believe it’s only a matter of time when dual core Atom netbooks start to show up, maybe around the fourth quarter. Once we begin to see these little beasties turn up, the distinction between netbooks and notebooks will effectively disappear.

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