After close to two years of accelerated growth, the initial euphoria around netbooks is subsiding. According to a study released by IDC on Thursday, Intel's Atom processor for netbooks represented 20 percent of Intel's mobile PC processor shipments during the first quarter, down from 24 percent in the fourth quarter of 2009.
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Intel CEO Paul Otellini recently said that netbooks seemed to be settling in at about 20 percent of mobile form factors. Otellini was positive about the company's Atom business, saying he expects significant growth in the netbook market this year. Netbooks are priced between $200 to $500 and are designed for Web browsing and basic productivity applications.
Intel is working to innovate on its netbook chips in order to sustain demand, Otellini said. The company will be introducing new chips later this year as it tries to improve the performance of the inexpensive, low-power chips.
Otellini said that Intel was on track to introduce a dual-core Atom processor this quarter. He was vague on details, however, and did not specify whether the upcoming dual-core Atom would be for netbooks or small desktops. Intel already offers dual-core Atoms for entry-level desktops, and a dual-core chip could provide a much-needed speed boost to netbooks, which have been described as underperforming at times.
"The next innovation coming to Atom is on dual-core," Otellini said during a financial earnings call on April 13. Atom chips also go into embedded devices, and in the future, into mobile devices like smartphones.
HP has already advertised a new netbook, the Hewlett-Packard Mini 210 running Intel's upcoming N455 chip, one of the Atom series processors, on Amazon.de. The N455 supports DDR3 memory, an upgrade over the DDR2 memory in most netbooks today. The DDR3-capable processors should allow data to be exchanged faster between the memory and CPU, translating to better overall netbook performance.
"We believe the potential and growth opportunities for Atom continue to be tremendous. You can expect to hear more about this momentum throughout May, and into Computex," said Suzy Ramirez, an Intel spokesperson, in an e-mail on Friday. Computex will be held between June 1 and 5 in Taipei.
Prices of laptops have been falling and the days of netbooks being a novelty have disappeared, said Jay Chou, research analyst at IDC. Laptops are bridging the pricing gap with netbooks, while offering better performance.
"You're getting something really attractive in the $600 range for better-performing notebooks," Chou said.
Users are also looking to do more on PCs than just Web surfing, like multitasking and viewing high-definition movies.
"The original intended message of letting people expect netbooks to behave differently or less effectively is not really ringing," Chou said.
Intel has to upgrade the Atom processor in order to keep netbooks fresh, Chou said. A netbook with a dual-core Atom processor with DDR3 memory will perform better, but it's hard to say by how much, Chou said.
A dual-core Atom netbook with DDR3 memory could be available at the same price as existing single-core Atom netbooks, said Dean McCarron, principal analyst at Insight 64.
The price points for netbooks have been established and may not change as Intel tries to segment the low-cost and mainstream laptop markets. Intel made a major technology shift earlier this year with the introduction of faster and more power-efficient chips for laptops and desktops, and there was room to improve its existing Atom processors, McCarron said.
"The single-core Atom product has sold well, but you can't let the low-cost platform get too distant from the mainstream platforms," McCarron said.
Intel in December introduced new Atom processors, code-named Pineview, that integrated the memory controller and graphics processor inside one chip.
There is very little interest in netbooks in enterprises, so the consumer segment should continue to sustain Atom demand, McCarron said. Atom could also continue to generate good margins for Intel as the cost of manufacturing drops.