Intel ponders netbook strategy with tablet rise

The company lags behind ARM in the tablet space, which is growing as the netbook market shrinks

After initial success, Intel's netbook strategy is at a crossroads as demand for tablets and low-cost laptops with larger screens rises, a company executive said this week.

Buyers don't want the cheapest PCs anymore, but desire snappy performance and better features on their computing devices, said Greg Welch, segment director for mobile client platforms at Intel. Netbooks' early success was partly due to low prices, but now performance is high on the list of buyers' priorities.

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"There was some disappointment on some of the experience side, it maybe didn't keep up with the pace of innovation. Now we're trying to reinvigorate that. We're trying to go in and integrate more technologies and we'll see... if it has a role to fill in the market place between an ultrabook on one hand and pure tablet experience on the other," Welch said.

Intel's Atom chip goes into most netbooks, the market for which has been hurt by the growing appetite for tablets. While worldwide PC sales grew by 2.6 percent during the second quarter this year compared to the same quarter a year ago, according to IDC, the share of netbooks as part of overall PC sales plunged to 12 percent from 22 percent.

Intel has also introduced Atom chips for tablets and smartphones, markets in which it has virtually no presence. Intel is challenging ARM, whose processors are in most tablets and smartphones. Intel is also trying to boost interest in PCs through "ultrabooks," which are thin-and-light laptops with tablet features. Chip analysts have predicted ARM will unseat Intel's dominance in the laptop market with its low-power chips.

Intel is looking at the Atom architecture comprehensively, and will make netbook chips until there is clarity in what consumers really want, Welch said. Many devices are being envisioned and Atom designs will be good for a range of them -- be they handheld or PC -- that are not based on Core processors, which are used in mainstream laptops and desktops.

"Whether the form factor is a netbook or a tablet, we don't know. We'll take a tablet, put a keyboard on it, it would be a netbook to a certain degree," Welch said.

Close to 80 percent of laptops worldwide use Intel chips, but analysts have said that ARM could challenge Intel with more power-efficient processors that could help laptop makers build devices with tablet-like features. Microsoft has already said its upcoming OS, Windows 8, will work on both the x86 and ARM architectures.

Welch contended that ARM CPUs may beat Intel's chips when it comes to power consumption, but are slower.

"As they start aspiring to get into clamshells, what makes anyone think that they have the performance to create the experience that people expect in that form factor? That's going to be their challenge," Welch said.

If ARM enters the PC market, it could face some challenges that Intel now faces with its netbook chips.

"We've seen this with... netbooks. Looks like a laptop, smells like a laptop, walks like a laptop. You took it home and go 'it's sort of like my laptop from 5 years ago.' The snappiness, the response, the ability to do media wasn't there to the same degree."

However, ARM's emergence is helping Intel focus heavily on power efficiency, Welch said. Intel earlier this year introduced 3D transistors that could make its future chips faster and less power hungry. The chips will be made using the 22-nanometer manufacturing process, and reach PCs early next year.

"It's good because it's motivating us to respond," Welch said.

Copyright © 2011 IDG Communications, Inc.