Intel Atoms not in demand: End of the Netbook?

Opinion – A report in Digitimes yesterday claimed that Intel has a surplus of Atoms because of a lack of demand and that it’s discounting them to second tier companies.

If the report is true – and believe me Intel is unlikely to comment on inventory or the lack of it, this could be the first sign that Netbooks are running out of steam as a hot cake item for buyers.

The market sources quoted in the Digitimes article claim that Netbooks face increased competition from low end notebooks and that’s squeezing the notebook sector. This, by the way, is a case of Intel being the biter bit. There’s always been the danger that sales of Atom processors would eat into the low end Celeron chips that provide Intel with far better margins.

Last week we examined the somewhat peculiar notion that Microsoft would provide a “starter” version of Windows 7 particularly for Netbooks but limiting people to the number of applications they could use. This is a far from satisfactory answer for many people who may well be disappointed when the very cute and dinky Netbook they bought is an underperformer.

These things are so cute – but they can never be a substitute for a medium or high end notebook. The discerning techie will know that and be able to use a Netbook for the kind of lightweight tasks it’s capable of, coupled with its daintiness, its light weight, and its wireless capabilities.  The vendors don’t and won’t stop talking about convergence but the background to this is the roaraway success of the Apple Iphone, which does satisfy many people by providing Internet capabilities and having rather a charming look and feel to it.

Lightweight is good, good battery life is better and price and design of a Netbook are important too. Given the choice of a rather clunky and heavy low end notebook and a very pretty Netbook, my choice would be the latter.  But there’s no way I’m giving up my high end notebook  in favour of a Netbook.  The fact is that we’re in the middle of a credit crunch, no one is buying anything other than the bare necessities, and the Netbook is, essentially, a luxury item.

Intel itself has always shown a certain ambiguity about the Atom and the Netbook category and perhaps it’s silently hoping that it is a fad, and it will be glad when it goes away so it can enjoy the better margins it feels it deserves on more powerful processors. The fact is the last thing the computer vendors and the chip manufacturers want to do is sell gazillions of low cost processors when they require high price CPUs to fund their R&D and their fabs.

The Netbook category is not going to go away, but I do have the very strong feeling that all the excitement and hype it’s generated is going to dissipate. That means that the majority of discerning buyers and corporations are going to plump for a notebook which offers a combination of power at a reasonable price.  Now the vendors and the CPU suppliers are just going to have sit tight and pray that things will get better and that coins spill out of people’s wallets rather than moths.