The next billion computer users can be found in places like Nguyen Du Secondary School. On a recent spring afternoon, sixth-graders fixed...
HO CHI MINH CITY, Vietnam — The next billion computer users can be found in places like Nguyen Du Secondary School.
On a recent spring afternoon, sixth-graders fixed their eyes on book-size laptops — Intel-designed Classmate PCs — as they reviewed their English lessons over a wireless network in a pilot program sponsored by the Santa Clara, Calif., chip-maker.
From California to Taipei, industry executives think they have struck a new consumer vein that will spur a computer-sales gold rush. As millions in developing countries embrace the digital world for the first time, computer and semiconductor manufacturers hope to cash in with a new generation of minilaptops. They say an emerging category of small computers will attract buyers in poor and wealthy nations alike.
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Intel calls them “netbooks,” while Hewlett-Packard prefers “Mini-Note.” They are low-cost and low-power.
“I have not seen this kind of energy around a category in a long time,” said Navin Shenoy, Intel’s Asia-Pacific general manager. He predicts more than 50 million will be sold globally by 2011.
Last fall, Taiwanese PC maker Asus surprised analysts and competitors with the successful launch of its Eee PC, a 7-inch, flash-memory laptop that was a hot holiday seller until supplies ran out. Now the PC heavyweights — HP, Acer, Dell — are playing catch-up.
But some industry experts remain skeptical that this “tweener” product — it fits somewhere between a regular laptop and a smartphone — will ever be more than an inexpensive toy for early adapters.
“The actual numbers are going to be a tiny, tiny fraction of total PC sales,” said Bob O’Donnell, an analyst with research firm IDC. He forecasts annual global sales of low-cost mini-laptops will be a mere 9 million by 2012.
Shenoy, though, predicts more than 50 million minicomputers will be sold globally by 2011. That may not seem impressive compared with the 214.3 million IDC predicts will be sold in 2011, but it nonetheless is a sizable number.
Search for new growth
Intel, searching for new sources of growth, has high hopes for the emerging low-cost computers. The giant chip-maker thinks many of these devices will be running on its new low-power Atom processor.
In the U.S., these small laptops — priced at $400 to $600 — will be a second or third laptop for families with school-age children, or on-the-go professionals looking for lighter laptops to tote around, said Shenoy, the former right-hand assistant to Intel Chief Executive Paul Otellini.
In countries like Vietnam, the slender gadgets will be something of a calling card from the PC industry. As governments roll out better Internet access — Vietnam is aggressively expanding broadband connections — the desire for inexpensive machines will grow, Shenoy added. Eventually, they could lead to sales of higher-end machines.
“They will draw in people much, much faster and get them on the Internet,” Shenoy said.
The low-cost mini-laptop trend was inspired by the nonprofit One Laptop Per Child (OLPC) project, which grabbed headlines by declaring it could make a $100 laptop for developing countries.
“It was only talk,” said a dismissive Asus Chief Executive and Chairman Jonney Shih.
OLPC founder Nicholas Negroponte, though, maintains the price for mini-laptops will drop “well below $100,” he said in response to e-mail questions. “Our 2010 target is $75.”
Last year, Americans were offered two OLPC XO computers for $399, with one going to an underprivileged child overseas. So far, about 600,000 have been ordered globally, with 85,000 shipped to U.S. consumers, Negroponte said. His organization is now looking to sell more in the U.S. through a third-party vendor.
Negroponte’s efforts have drawn skepticism from the start over whether a nonprofit could ever deliver on its promises. In January, Negroponte accused former partner Intel of disparaging the XO to promote the chip-maker’s Classmate PC, which the company denied. “They create fear, uncertainty and doubt, often to spoil, not create, a market,” he said.
The success of the Eee PC caught the computer industry by surprise.
Asus, which launched its customized Linux laptops in October, sold about 350,000 in three months. Early in the holiday season, it was the No. 1-selling computer on Amazon.com. If not for production problems — particularly a lack of supply of 7-inch LCD screens — the company said it would have sold 500,000 in 2007.
Asus began working on its mini PC strategy in the fall of 2006. “We talked with Intel about the next billion computer users,” Shih said. “They were also very excited. We only needed three days to have the prototype built.”
Initially, Intel and Asus named the machine “the Jonney book” in honor of Shih’s vision.
Asus has since sold 1 million Eee PCs. Shih expects to sell 5 million Eee PCs this year. The company just rolled out an 8.9-inch model. The $549 laptop has a touch screen and comes with the option of a Linux or Windows operating system.
“Almost no entry barrier”
Initially, HP and Dell executives downplayed the less-expensive laptops, telling analysts the small units would never be successful sellers, Taipei-based Goldman Sachs analyst Henry King recalled.
Now, he added, “everyone is following. There is almost no entry barrier. It will become another area for competition, just like the regular notebooks.”
In April, HP announced its Mini-Note laptops, which will start at $499 and is aimed at the educational and general markets. Intel also unveiled its low-cost Classmate PC in the U.S., where it is available as the 2goPC by CTL.
Taiwanese computer maker Acer is launching its version of the ultra-compact laptop, as is Dell.
IDC’s O’Donnell, though, doesn’t think U.S. consumers will buy them in large numbers. The small keyboards are difficult for adults to use and there are regular notebooks in the same price range as mini-laptops.
Even people in developing countries are apt to find them to be too stripped down, O’Donnell said. Besides, he added, in many parts of the underdeveloped world, people can’t afford even basic Internet service, let alone a $400 laptop.
“There are a lot of bigger problems you have to solve before you can get to the cost of the PC,” O’Donnell said.
At the Ho Chi Minh City Middle School, though, the Intel laptops were a huge hit.
Students gathered in clusters at tables, instead of traditional rows of wooden desks, where they usually sit rigidly — and quietly — for hours.
The room was filled with joy as they worked through their lessons, wirelessly.
“It’s very great,” said 12-year-old Nguyen The Can after class.
Classmate Trinh Hoa Huong Phuoc chimed in, “I want to buy one!”