Is Intel’s Atom Splitting Apart the Netbook Market?

Intel (s intc) reportedly plans to pack more power into its next-generation Atom chips, the line that currently powers netbooks. While some thought the netbook market was a race to the bottom — or at the very least, the low end of the market — Intel is reversing that course by maturing the Atom. The move will further blur the lines between netbooks and notebooks, and could mean the netbook market will disappear as quickly as it arrived.
The Atom line accounts for less of Intel’s overall chip sales than it used to; an upcoming IDC report will reportedly show that in the first quarter of 2010, Atom contributed up to 20.3 percent of the Intel’s processor sales compared to 24.3 percent the prior quarter. Such a drop coincides with slowing netbook sales, the result, in turn, of consumers having a wider variety of device choices, including notebooks, which are entering price levels where once only the lowly netbook dared to tread.
The NPD Group reports the average selling price of a Microsoft Windows (s msft) notebook was $528 for the 2009 holiday season. That number includes netbooks — which still typically fall into the $350-$450 range — but also premium or specialty notebooks that can cost north of $2,000. While low netbook prices drag down the average selling price of notebooks as a whole, there are plenty of full-featured notebooks available at near-netbook prices of $500 or less. Likewise, some Atom-powered netbooks can be configured with options that boost their price to above $700. There’s more of a pricing overlap now between netbooks and notebooks than ever before, even though the potential for cannibalization of both devices already existed.
This price parity is happening as Intel is beefing up the Atom — unofficially, Intel’s expected new N455 and N475 Atoms will have faster clock speeds and support DDR3 memory, much like today’s notebooks. Instead of a growing capability gab between netbooks and notebooks, the two device classes are becoming more similar. Does that mean there won’t be a netbook market in the future? It could and if so, that would be tragic — there’s still a place for netbooks in my opinion, although some — Steve Rubel comes to mind — can do 80 percent of their work with today’s Apple (s aapl) iPad and there will be more slates coming down the pike later this year.
Intel and computer makers shouldn’t overlook the fact that netbooks can be used in places where a traditional larger computer doesn’t make sense, or if that computer has run out of battery power. As Dave Winer said recently on his blog: “I think the tech industry should give up the belief that netbooks are a temporary thing and fully embrace them and make the work better and better. Ultimately the user is always right, and ultimately always gets what they want.” Maybe he needs to talk to Intel directly — if the trend continues, the split between netbook and notebook could disappear entirely.
Related research on GigaOM Pro (sub req’d):
I Want a Netbook, Not A Little Notebook!