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The Potential Impact of the End of the Mini-note Era

To many the end of the mini-note, or netbook, era can’t come fast enough. Poor performance and low margins plagued consumers and brands alike. Still, the category quickly grew to be a sizeable portion of the mobile PC market but as its end appears close at hand the question is, what happens next?

If you’re a panel or PC maker, the unit shipments that mini-notes represent are worth noting. At the height of their popularity in the not so distant 2009 they made up nearly 20% of the mobile PC market, or just over 34 million units. By the first quarter of 2012, the mini-note share of the mobile PC market was down to 8%, or 6 million units. The rapid decline in shipments points to a gradual end for the low-cost category especially as brands close out plans for future models.

Mini-notes represented an era of chasing market share over profit. Up-and-coming brands chased high volumes to reach economies of scale enabling them to compete with established brands in terms of favorable component costs and competitive finished goods prices. PC brand Asus, the company that essentially started the mini-note category with its eee PC, has requested that its NB OEMs stop production of mini-note PC models in the third quarter of this year before the expected launch date for Windows 8. Supply chain indications are that HP and Lenovo don’t have mini-notes in their 2012 business plans, frustrated with the low margin tradeoff for market share. PC brands, such as Dell, Toshiba, and Acer, seem to be preparing to wean themselves of mini-notes, informing their respective panel makers to pull-in their 10.1”netbook PC panel supply volumes by the third quarter of this year. From a panel market perspective, volumes for AUO and Infovision are expected to drop. According to our Quarterly Large-Area TFT Panel Shipment Report, AUO plans to produce around1.3M mini-note panels per quarter, and Infovision plans to produce around1.5M per quarter. The Korean panel makers are anticipating the end of mini-note panel demand from their customers and are moving to terminate production of screens.

Another indication that the mini-note era is coming to an end is there is not likely to be a lower cost version of Windows 8 available to enable a low cost mobile PC, like there was with Windows 7 and Starter Edition. In addition to Intel’s Atom processor, Microsoft’s Windows 7 Starter Edition operating system were lower cost components to a system’s build of materials; supply chain indications are that Windows 7 Starter Edition cost about $25 as compared to $68 for the Home Basic Edition. With no low cost version of Windows 8, a low cost mini-note would be even harder for brands to justify from a margin perspective.

While the mini-note category declines, PC brands are looking to Windows-based tablet PC models to gain some traction. For figuring out best portable size of tablet PC, brands are experimenting with11.6”,13.3”, and17.3”prototypes. Currently, we expect11.6”to be the most common size likely to be used in Windows tablets. In form factor design, brands are also experimenting with detachable keyboards as they hope to appeal to the productivity needs of consumers as is Microsoft who is bundling Office 15 with its ARM-based Windows RT operating system for tablets.

While initially enthusiastic about a Windows OS for ARM-based devices, brands have become less optimistic about the short term opportunity for Windows RT. The main concern is the pricing for the OS, which is higher than expected making it difficult to compete against lower cost Android-based tablets and the entrenched Apple iPad with the extensive app library support. Besides, brands also concern on ARM-based CPU’s computing performance if end-users down-load more and more application software in the future, as like Adobe and flash.

Whatever will replace the mini-note, let’s hope it’s more profitable, more useful, and longer lasting than its predecessor.

  • robert pogson

    This analysis neglects the possibility of OEMs shipping netbooks with GNU/Linux, a product that sold out globally. Such machines are competitive with tablets because many users need to type and a real keyboard beats a screen.