Netbooks Blamed For Falling Prices in Notebook Market

Michelle Maisto covers mobile devices, Android and Apple for eWEEK and is also a food writer.

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Whilst every segment of the notebook industry shrunk during the second quarter, the one bright spot has been netbooks. But as a new report from DisplaySearch points out, netbooks are now being blamed for eroding ASPs across the board

More depressing news has emerged for the notebook industry after a new report from DisplaySearch showed that every segment has shrunk year-on-year during the second quarter. Yet the netbook segment remained hugely popular, growing 264 percent during the period.

Netbooks are once again a boon to a hurting portable PC market, stated DisplaySearch in a report on quarterly notebook PC shipments. But it warned that the main reason for their success (i.e. low prices), is encouraging a problematic trend.

“Mini-notes [also known as netbooks] have been a significant contributor to volume growth in the portable PC market as their very attractive price points make owning a secondary computer viable for many consumers,” said John F. Jacobs, director of notebook market research with DisplaySearch.

“However, the lower [average selling price (ASP)] of these devices are clearly having a negative impact on portable PC market revenue. For 2009, we expect continued ASP erosion across all portable computer categories, leading to the first [year-over-year] decline of portable computer revenue,” Jacobs added.

DisplaySearch expects these shipment and revenue trends to continue into 2010, with netbooks responsible for 21.5 percent of shipment volume but only 10.9 percent of total revenue for the mobile computer market.

Netbook ASPs fell from $506 (£318) in the second quarter of 2008 to $373 (£234) in the first quarter of 2009 and to $361 (£227) in the second quarter, representing a 29 percent reduction year after year. ASPs of notebook PCs, however, fell at a rate of 10 percent, while overall portable PC ASPs fell by 19 percent year over year.

However netbook revenues, the single mobile PC category to show year-over-year growth, increased by 264 percent, with second-quarter 2008 revenue of $848 million (£532 million) increasing to $2.24 billion (£1.41 billion) in the first quarter of 2009 and $3.07 billion (£1.93 billion) in the second quarter of this year.

DisplaySearch details the low-price appeal of the netbooks by explaining that their price points make them attractive to buyers seeking secondary PCs, as well as to first-time buyers in emerging markets, who often don’t require all the features of a mainstream notebook.

Telecom providers in all regions, which look to boost revenues by offering subsidised netbooks with two-year service contracts, are also responsible for rising netbook sales, along with US cable TV providers, who also tie the subsidised netbooks to service packages.

The value of the total notebook PC market for the second quarter of 2009 was $26.4 billion (£16.57 billion), which was up 10 percent quarter to quarter, but down 5 percent year over year.