Are Tablets Really Killing Netbooks?

For months we’ve been hearing that tablet computers–led by Apple’s iPad–are hurting netbook sales in a big way. But are they really? It depends on whom you ask. For now, touchscreen tablets do appear to be luring consumers away from netbooks. In the long term, however, netbooks will likely hold their own in an increasingly fragmented mobile device market, particularly as computer makers address user complaints by enhancing netbooks with faster processors and new capabilities.

Dueling Data

Tech industry analysts can’t seem to agree on whether tablets are harming netbook sales. Changewave Research in October surveyed more than 3100 consumers and found that only 14 percent of those who planned to purchase a laptop within 90 days would get a netbook–a significant drop from 18 percent at the start of 2010, and 24 percent in June 2009.

But ABI Research says the netbook market will not be “gravely injured” by the iPad and similar tablets, including the Samsung Galaxy Tab and Research In Motion’s BlackBerry PlayBook. “This is a rumor perpetuated by Apple fanatics,” wrote ABI Research mobile device analyst Jeff Orr in an e-mail to PCWorld.

Orr points out that annual netbook shipments continue to grow, and that the top isn’t in sight. Specifically, about 36 million netbooks shipped worldwide in 2009, and an estimated 43 million will ship in 2010. The netbook is the first ultramobile device to reach “mass-market appeal,” which Orr defines as a product that ships 40 to 50 million units annually. He acknowledges, however, that netbook sales are slowing, and says that today’s shipments don’t match the “meteoric growth” of the past two years.

Blame the iPad?

Netbook shipments in the United States fell 34 percent from the third quarter of 2009 to the same period in 2010, according to research firm Gartner. The likely culprit? A certain tablet from Apple comes to mind.

“Yes, there was some displacement of mini-notebooks by the iPad in the U.S., but determining how much is not an exact science,” wrote Gartner client computing research director Angela McIntyre via e-mail. She estimates that Apple’s bestselling tablet “displaced” 10 to 20 percent of netbook shipments in the United States in the third quarter of 2010, which suggests that a sizable number of consumers chose the iPad over a netbook.

Consumers appear not to be as enamored of netbooks as they once were. But tablets aren’t the sole cause.

In fact, netbooks weren’t the only computer devices to suffer from sluggish back-to-school sales in the third quarter of 2010. “Many factors contribute to this, such as the down economy, few new compelling PCs on the market, and a wait-and-see attitude about new PCs and media tablets coming to market next year,” wrote McIntyre.

Twice the Price

“We are seeing a slowdown–a pretty dramatic slowdown–in the netbook market. And a reasonable amount of that is from the iPad,” says IDC computer analyst Bob O’Donnell. Netbooks and touchscreen tablets are both secondary computing devices, and the consumer’s dilemma is deciding which gadget to buy.

However, the disparity in netbook and tablet prices makes the iPad-is-killing-the-netbook argument “a little hard to swallow,” says O’Donnell. For instance, the average selling price for netbooks is under $300, according to IDC. But for the iPad it’s $630–more than twice as much.

“Right there’s a big disconnect between [average selling prices]. That’s why it’s hard to say that there’s a direct, one-for-one knocking off, because of that huge price gap,” adds O’Donnell, who sees a correlation between today’s tablet-versus-netbook battle and the netbook-versus-laptop debate of 2008.

“This is sort of a netbook redux. Two years ago, netbooks were going to cannibalize notebooks,” he says. “There was a period when a whole bunch of people bought netbooks, and it somewhat skewed the view of the notebook market. But at the end of the day, when people needed to upgrade a notebook, they did.”

Even if the iPad-induced sales hit proves to be temporary, the bigger issue is how netbooks will rise to meet the tablet challenge. “Nobody is saying that a netbook or a tablet is a must-have, primary device. That’s where desktops and laptops fall,” says Cindy Ng of Intel’s netbook marketing team. “It’s a similar market because they’re both companion devices and nice to have. But at the same time, I think there are different types of consumers who value different usages.”

Netbook users, for instance, really want a physical keyboard. “For doing Twitter feeds and social networking updates on Facebook, clearly the netbook with a physical keyboard really enables that ease of use much more than a tablet would with a virtual keyboard,” says Ng. And for frantic classroom note-taking, a netbook usually tops a tablet.

Next page: Netbooks, Phase II

Netbooks, Phase II

Intel Atom processors power many netbooks, and the chipmaker predicts that a netbook renaissance will occur in the first half of 2011.

A new crop of netbooks will add wireless syncing capabilities that allow users to sync data easily among multiple devices, such as their smartphone, laptop, and desktop. Intel’s new dual-core Atoms are more powerful and allow netbook makers to build sleeker, slimmer devices that are “potentially as thin or comparable to the new MacBook Air,” says Ng. Another as-yet-unnamed feature would make it easier for netbooks to stream music to a home stereo or speaker system.

AMD’s upcoming Brazos-platform processors will combine low-power dual-core and single-core CPUs together with a DirectX 11-capable GPU on the same chip. If it ends up as good as it looks on paper, it should provide better performance than today’s Atom-powered netbooks do, while still preserving battery life and allowing for small and thin laptops. We should see premium netbooks and inexpensive ultraportable laptops in early 2011 with the new chips.

Acer’s Take

Few computer makers in the United States are more closely associated with the netbook than Acer, which helped define the genre with its Aspire One netbooks in 2008. Not surprisingly, the company believes that the tiny portables will thrive even as tablets take hold.

“While the netbook market has matured and is no longer experiencing the explosive growth we saw initially, it is still a key product category that will generate significant sales for consumers looking for both productivity and entertainment in a mobile device,” wrote an Acer spokesperson in an e-mail to PCWorld.

Acer, which in November announced plans to enter the tablet market, sees a clear distinction between slates and netbooks. “Tablets…represent a different product segment that caters primarily to gaming and content consumption in the $400-$600 range,” the Acer representative wrote.

But netbooks typically sell for less. Most cost between $300 and $350, says Intel’s Ng, though new features and innovations may cause prices to inch closer to $400.

In the coming years, tablets and netbooks will take divergent paths–the former focusing on entertainment, communications, and convenience, and the latter adopting a more work-friendly role. Each will carve out a niche in the personal computing landscape. One will not kill off the other, however. After netbooks succeed in boosting their processing power and adding new capabilities, they’ll appeal to users who want a lighter and smaller version of a full-size laptop.