Did Intel Misjudge Success of the Netbook?

Intel (INTC) reported slashed revenues of about a billion dollars yesterday for Q4. Could it be that Intel misjudged the success of the Netbook and its Atom processor. Lets take a look at some figures. The Atom is processed with 45nm feature sizes on 300mm wafers and measures 25 square mm. It is priced at about $29. A total of 2,436 Atoms can be made on one wafer for a total selling price of $70.6K (neglecting edge losses and yields for this quick calculation).

Intel's Penryn Core 2 processor is used in notebooks. It is also processed with 45nm feature sizes on 300mm wafers and measures 107 square mm. It is priced at about $279. A total of 660 Penryns can be made on one wafer for a total selling price of $184.1K.

For 2008, we estimate that 11.4 million netbooks were sold, up from 400,000 in 2007. For 2009, we estimate that 21.5 million netbooks will be sold, a growth of 189%.

For 2008, we estimate that 145.9 million notebooks were sold, up from 109.2 million in 2007. For 2009, we estimate that 177.7 million notebooks will be sold, a growth of 21.8%.

The netbook is touted as a replacement for the notebook. Without netbooks, much of the sales would be diverted to notebook purchases. The percentage is questionable. Let's assume 50% of the purchases in 2008 and 2009 would be for notebooks if no netbooks existed. That would equate to 5.7 million more notebooks (50% of netbooks) in 2008 and 10.8 million in 2009. At a price difference of $200 per processor between the Penryn and Atom, Intel lost $1.14 billion in revenue in 2008 by making cheaper processors. It stands to lose another .$2.16 billion in 2009.

Looking at Q4 in question, say Intel had to make 5 million Atoms to meet demand in Q1 2009. At a loss of $200 per processor, that's $1 billion in lower revenues, about what they are reporting.

I'd like to think of it as "Intel's Atom Bomb". It indicates the tech sector is not really that bad off as the numbers suggest, but just a miscalculation on Intel's part. The calculations are oversimplified, I admit, but I submit there is logic in this analysis.

Disclosure: None

Comments

[Joe Public:]

I agree that not every netbook purchased is a notebook not purchased. Far from it. We bought a netbook for Christmas. At this time, we would not have bought a notebook or other PC if netbooks didn't exist. There would have been some other present under the Christmas tree. The netbook fills a somewhat different need than a larger notebook. We already have a 2 notebooks and 2 desktops in the family. We didn't need another notebook. I'm sure many other consumers view the netbook the same way.

Jan 09 02:09 AM