Abstract

Impact on Industry

Prevent AMD Yukon from Making Inroads into Low-price Portable Market

The biggest difference between AMD's Yukon platform (AMD Athlon Neo / Processor MV-40) and Intel Atom is that the Yukon platform does not impose limits on panel sizes. Therefore, manufacturers are more likely to adopt AMD when launching relatively large-sized value-line lightweight and thin products. For example, the share of AMD Yukon in HP's 12.1" models is high. Furthermore, AMD plans to roll out Congo in the third quarter of 2009, while Intel's Calpella is only scheduled for rollout in the first quarter of 2010. Regardless of timing or product mix characteristics, by taking the high-end ULV platform and develop it towards the value-line segment and roll out the CULV platform, Intel is obviously trying to block AMD Yukon from making inroads in the portable market with sizes above 11.1"-13.x".

Contain Upward Development of Netbook Atom

Intel Atom is the dominant force in the netbook PC market. From a revenue standpoint, however, the low-price Atom only makes a limited contribution to Intel's revenue despite its market size. Some vendors are using the Atom Z series, which Intel designed for MID (Mobile Internet Devices), for 11.1"-12.1" notebook PC solutions. In the short-term future, the Atom will continue to expand its share in the mobile computing market, but in the long-term future it might encounter a growth ceiling. Intel's launch of the CULV platform is aimed at meeting market demand for value-line portable products; it also aims to clearly define the size limits for products which adopt Atom. In this way, the company not only hopes to clarify the Atom usage for downstream companies and increase the price negotiation power of companies, but also to safeguard its control over its own-developed industry standards, and overcome revenue barriers.

More Sophisticated Market Segmentation

In the current economic climate with weak consumer spending, Intel has chosen to develop ULV towards value-line segments and roll out the CULV platform, filling value and performance gaps in its product lines and improving the balance between thin and lightweight design on the one hand and price on the other hand. For consumers who prefer full-function notebook PCs yet need thin and lightweight design to carry them and also take price into their considerations, Intel's new platform undoubtedly offers more choices.

Meanwhile, in the CULV series, there are entry-level, mid-range and high-end CPU and chipset product mixes, making this market segment more intricate. It gives manufacturers diverse choices when rolling out related notebook PCs. End-market sales prices also have more flexibility, conforming to the US$699-899 price range recommended by Intel. The product mix in the 11.6"-13.x" size range also becomes more comprehensive.

Stimulating Profits in Industry Chain

As Intel dominates the mobile computing industry, the products it rolls out lead to a high level of cooperation between companies within the industry chain. Besides ODD and PCB manufacturers which have not invested in HDI, the major companies in the industry chain can all increase their profit sources. Furthermore, the Intel CULV has SFF (Small Form Factor), and pushes companies to strive for a balance between lightweight and thin design and costs.

Overall, with the economy in a weak phase, the CULV has already caught the attention of the market. Brand-name vendors such as Acer, Asus, and MSI are aggressively rolling out products, which could stimulate other companies to follow in their footsteps. Regardless of the components used by branded vendors and ODM companies or the pricing and promotion of products in the end-market, Intel is in the most profitable position.

Impact on Market

Create Demand

CULV platform applications will be in consumer segments which feature relatively high price sensitivity. Consumers who originally wanted to buy a portable product but could not accept the past prices of 11.1"-13.3" products, could see prices fall to within their acceptable range among the new wave of products being rolled out, and eventually purchase products.

Squeeze Effect

CULV platform notebook PC sizes are wide-ranging, and companies' product plans center around 11.6"-13.x". Conforming to 16:9 specifications, if costs can decline significantly, CULV platform notebook PCs will replace other platforms. For example, 11.1" and 12.1" ULV products could slowly retreat from the market.

Inroads Effect

Regarding impact on the 7"-10.2" netbook PC market: thin and lightweight design and low prices will attract consumers which value mobility features. Furthermore, compared to 7"-10.2" products, CULV notebook PCs have quicker computing performance, more comprehensive functions and more convenient sizes compared to 7"-10.2" products. Therefore, CULV products could attract consumers which are not very price sensitive but have high demand for mobility.

Regarding impact on 11.1"-13.3" notebook PC market: CULV platform notebook PCs are thinner and lighter in their design, and their prices are significantly lower than existing high-end 11.1"-13.3" commercial products. With the economy in a downturn, customers who were planning to buy 11.1"-13.3" high-end products are switching towards a wait-and-see attitude. There is the possibility that consumers with high price sensitivity choose to buy CULV products.

Vicious Circle Due to Low-price Trend

The emergence of the netbook PC attracted a large number of consumers. Now, there is a chance of large-scale price declines in originally high-end portable products. This will lead consumers to become more sensitive towards prices. In the future, if clear differentiation can be achieved in product design and positioning, prices can only be raised in the event of an economic rebound or product replacement wave if product brands and after-sales services have absolute advantages; otherwise, it will be hard to convince consumers to buy high-priced products.

The low-price trend could have negative effects on the industry. Market pricing will become more competitive, and long-term development does not look healthy. For this reason, some branded vendors will be cautious and only roll out a small amount of products, limiting the penetration of CULV platform notebook PCs in the market.

Overall, the CULV platform notebook PCs focus on the 11.6"-13.x" market segment. However, for a long time this segment's share of the overall notebook PC market has been below 10%. If the netbook PC (7"-10.2") market is added, the share increases to 22%. Considering all the factors analyzed above, it is expected that CULV platform notebook PC share in the mobile computing market will reach between 12% and 15% in 2009.

Appendix

List of Companies