2 posts • joined 21 May 2009
I blame Microsoft for this news, not Intel...
In the early netbook days, manufacturers shipped their systems with Linux. This made them free of Microsoft's rules and restrictions, but less sophisticated users were irritated that the netbooks wouldn't run their Windows software, so netbook makers caved and negotiated Windows XP licensing with Microsoft. Linux netbooks are now more of a rarity than the norm.
To avoid cannibalizing its Vista sales, Microsoft laid out very specific restrictions for what a "netbook" was and whether it could be preloaded with XP rather than Vista. Those restrictions included limits on processor speed, built-in RAM, SSD/HD size, and graphics chipsets. Pretty much every currently-shipping netbook is sitting at (or very nearly at) the max specs established by Microsoft for XP licensing. I don't believe that's a coincidence. Netbook makers don't want to have to use Vista, which probably won't run well on netbooks anyway, so they're stuck with Microsoft's arbitrary XP limits. That's probably the most significant reason Intel isn't seeing "demand" for higher-end graphics. (If you think I'm making this up, do a web search for "Microsoft netbook restrictions" and you should turn up a few articles to back me up.)
Windows 7 should significantly loosen (or even eliminate) those restrictions. Once it's released, netbook makers will be able to seriously consider including dual-core processors, more RAM, and better graphics. Intel will probably start seeing significant demand for its graphics chipsets then.
I'd personally like to see netbook makers bypass Microsoft and start shipping machines running Ubuntu, not because of any preference for Linux but because it would send a message to Microsoft and allow netbook makers to spend the money they're currently dedicating to XP licensing on improved hardware inside the box. Even if the netbook came with XP, I'd probably just load Windows 7 RC and Ubuntu on it anyway. (That's what I did with my current netbook.) I suspect others might as well.
I also don't think it's a surprise that netbook sales leveled off this quarter. Each new netbook model released still conforms to the same netbook spec limits that last year's models adhered to, so the only improvements we're seeing are in form factor, battery life, design, and other non-performance improvements. Where some owners might have purchased a newer, faster netbook this year, there isn't one to be had. What's the point of spending $250-400 on a new netbook that has the same CPU, RAM, HD, and graphics chipset as your old model - even if it's a nicer color or a bit thinner/lighter?
I think the netbook market will heat up a lot after Windows 7 is released, but I don't expect to see it happen before that unless Apple releases something that scares Microsoft enough to loosen the XP restrictions or netbook makers return to Linux (with a distro like Ubuntu Netbook Remix).
Things were bound to level off...
This market was bound to level off eventually. No market grows infinitely large. That being said, there are some artificial factors at work here. The most significant one is the restrictions Microsoft places on netbook makers in order for them to qualify for cheaper XP licenses. Virtually all currently-shipping netbooks sport specifications that are at the Microsoft-defined limits and not beyond (though a few are below).
If last year's netbook didn't meet your needs in terms of performance, this year's won't, either. They're pretty much the same in terms of CPU, RAM, disk space, and graphics chipset. And if you bought one last year, the only difference this time is the color of the case or the form factor (generally speaking). There's no incentive to buy a new netbook if you already own one because it's not much of an "upgrade".
Netbooks are virtually as good as they're going to get until Microsoft ships Windows 7 (or Apple ships a netbook to compete, or netbook makers return to Linux - which I'd like to see but don't expect). Once that happens, they can look at dual-core CPUs, more RAM, larger storage, etc. Until then, netbooks are at their specification limits and we can't expect anything really "better". Hopefully pricing will stay roughly the same and specifications go up, otherwise (as has been noted here) the netbook will lose in favor of low-end notebooks with better specs.
Combine a leveling off of specifications, an increase in price range (as noted by others here), and a slow economy... a leveling off of netbook sales is practically guaranteed... Even a decline in sales would make sense. Once the "XP Limits" are removed, I think we'll see some very interesting stuff in the netbook space. In the meantime, expect a lot more of the same old thing... and a decline in overall interest.