ARM Processors Will Gain 55% of Netbook Market by 2012

ARM (ARMH) processors, not Intel’s (INTC) Atom, will benefit from the current technology-economic cycle.

While Intel’s Atom will hold more than an 80% share of the 21.5-million netbooks sold in 2009, a movement is underway that will enable the ARM processor to gain a 55% market share in 2012.

ARM processors, not Intel’s Atom, will benefit from the current technology-economic cycle. Anyone thinking that ARM will make up only a small percentage of netbooks gong forward is not thinking outside the box.

To begin with, Netbooks were invented as a means for people to connect to the Internet and communicate. It has its foundations in the One Laptop per Child, a program which Nicholas Negroponte launched to create an inexpensive computer for children in developing countries. The hope was that it would have Wi-Fi, a color screen, a full keyboard, and sell for about $100.

Taiwan’s Asustek (AKCPF.PK), the world’s seventh largest computer manufacturer, took the reins and launched the first commercial netbook in late 2007 and sold 350,000 units in a few months using Intel’s Atom processor. The result was a low-end sub-notebook costing much more than $100 ($300-$400) but selling to middle-class consumers rather than to the poor.

Technology changes are underway to undermine Atom’s grip on the market during a recessionary time when people don’t want, and can’t afford, a second laptop just to carry around. The movement is toward the original intention of a netbook – an inexpensive device for accessing the Internet.

We see two technology factors converging with the poor macroeconomic situation that will create a market for ARM – the release of the Cortex-9 microarchitecture and the emergence of cloud computing.

Mobile internet devices such as smartphones that are based on the ARM11 microarchitecture dominated the market in 2008. A successor to ARM11, the Cortex-A8 and the multicore Cortex-A9, are now entering the netbook market. Multiple cores processors run at a lower speed and process more instructions per watt than single high-speed cores. The A9 offers clock speeds over 1GHz and offers multitasking, one of the current limitations of the ARM11.

ARM runs under the Linux operating system. Linux is free, whereas Microsoft (MSFT) charges a licensing fee up to $35 on each netbook. To further keep costs down near the intended $100 price point, enter cloud computing.

Cloud computing is a web-based service that resides on the web, and is much cheaper than software packages that are purchased and stored on a netbook’s hard drive or solid state drive. Eliminating a drive will reduce the price of a netbook a further $55.

There is a wide array of open-source software that all Linux distributions share. It is reshaping the software industry by reducing the overall cost structure and represents the future of enterprise software. Some applications require a monthly fee, such as what is available from Software-as-a-Service (SaaS)-leader Salesforce.com (CRM), which recently recorded a record financial quarter and its first billion-dollar year. As cloud computing become ubiquitous, competition will drive down monthly SaaS fees.

Along with the growing competition among software service providers, we will see a new infrastructure taking hold, modeled after Hewlett-Packard (HPQ) (cheap printer, expensive ink) and the mobile service providers (cheap cellphone, expensive monthly wireless charge). This subsidized bundle model will grow the ARM netbook to greater market shares.

As cloud computing becomes more sophisticated, we will see an Internet Protocol-based convergence of audio, video, productivity applications, and IT data run on ARM-based netbooks.

Stock position: None.

Comments

[malach hamo...:]

if one thinks that intel won't further integrate its chipset to bring down power consumption, one really doesn't know history.

Intel may have been caught a bit short in fully appreciating the netbook, but one can safely assume that with its massive r&d, it should be able to out-engineer any rival in the chip world.

Mar 10 07:02 AM

[synapsid_on_SI:]

ARM does have some merit with its strong position in the handset/smartphone market. Technology-wise a good performing ARM-based netbook using Linux is pretty cool.

However, a netbook is not a smartphone. The main value proposition of a netbook seems to be that it is pretty much a full-featured notebook, just a little smaller. As such a Microsoft Windows OS will likely remain the mainstream choice for netbooks. This implies limited opportunities for ARM in this space. Also, as noted before, Intel has plenty of resources to develop low-cost and efficient products for this market. There may be an opportunity for ARM in the low-end like the latop-per-child program in developing countries, but not the mainstream netbook market in developed countries.

In the last nine months, tens of millions of first generation Atom-based netbooks have already been built, based on Windows or a Linux derivativs. While sales of both products have been below expectations, the Linux-derivative-based products have proved to be particularly unpopular.

Note that I am a fan of Linux which I use almost exclusively, and I would love to have an ARM/Linux netbook, but at the same time I am skeptical that this would be a huge market.

Mar 10 08:19 AM

[Kris Tuttle:]

Both Atom and ARM chips happily run Linux. So that's not a difference.

I think it's also worth noting that people seem willing to spend $35 for an OS that offers some value over Linux in terms of applications, UI or whatever.

ARM certainly has a growing opportunity as smart devices proliferate. However I'd fully expect Intel to execute well here and be the engine in most general purpose computing devices that look like laptops or netbooks.

Mar 10 08:40 AM

[WKFord:]

Mr. Castellano is certainly missing a lot here, and I agree with the previous comments. Infact, Atom will evolve quickly and is probably well ahead of the ARM chips at this point for netbook applications. One point to add is that INTC has needed to broaden its portfolio for a long time. Several attempts have been made. However, Atom may be the best bet yet and I'm sure the managers will be focused on not letting this space slip away. So expect redoubled efforts, leveraged by their mainstream product line.

Mar 10 10:52 AM

[captainccs:]

It's Intel's market to lose and I think they will lose it. A processor is just a processor and for equal throughput, cheaper is better. All that fabulous R&D and all those fabulous Fabs will keep the price of Atom too high. They already flunked out with StrongARM, a.k.a. xScale.

Downsizing is just too painful for Intel.

Mar 10 11:20 AM

[Spook:]

One quick question for those who tracks Intel Atom, Via (a Taiwan company) also produce a competing netbook CPU, may not have a big market shares as Intel have, but heard that China local netbook manufacturer are using Via chip instead of Atom.

Anyone have information?

Mar 10 09:59 PM

[Miper:]

Considering its strength in recent years it seems like Intel hold all the cards. Whether Mr. Castellano's predictions come true is anyone's guess considering the speed of technological advances.

I think a bit of extra info on ARM evens the playing field more than people would think as little about ARM is mentioned in the article. Though ARM are comparatively small compared to Intel they are dedicated to processor research only and have consistently, for almost twenty years, beaten Intel time and again with advances in low power, cheap microprocessors. They license the chips to larger competitors of Intel who have the money to mass produce them and are not necessarily limited by the current US economic climate like Intel is. ARM chips are the dominant type of low power microchip with 98% of all mobile phones containing them. Projections suggest that 5 billion ARM chips will be sold yearly by 2011 with over 10 billion having already been sold worldwide. Considering ARM started off producing computer chips and still does produce some for RISC OS based machines, which in the 80s were some of the most powerful machines available, it is not implausible that they could return to their roots. Who knows, unlikely as it may sound, maybe Intel will admit its ineptitude in low power processors and settle its old grievances. And, like many other companies, it may turn to ARM licenses rather than pour more money into what it has been unable to solve so far.

Mar 10 11:12 PM

[stig:]

I think he is partly right. The netbook market will divide into two subsections: a high-end section, using atom and MS 7. The typical price for a netbook in this section will be 3-400$.

But we will also see a low-end market develop, with arm-processors and linux - the typical netbook price in this segment will be $200.

The difference between the two segments will not only be performance and price, however. The arm/linux segment does have a couple of very significant advantages over the intel/MS segment: slim design (15-17 mm, which is thinner than Mac Air), and very extended battery time (8-20 hours). It is also plausible, that this segment will utilise screens suitable as E-reader screens (because that is a logical use of a netbook), such as this up-and-coming low-power and low-cost screen www.pixelqi.com/products

My prediction, therefore, is that the high-end netbooks will have sufficient graphics power to act as simple gaming-netbooks on the go, while not being suitable for any extended use, while the low-end segment will develop into netbooks suitable for bringing your online books with you as you go, do a little surfing and write the occasional office letter. This segment division is not only about price, but also about practicality: the arm/linux segment will be able to outperform the intel/MS segment in some areas as well as the opposite. Slim design, long battery time, low price and readability will be the strongholds of the arm/linux segment, while "gameabillity" and familiarity will be the strongholds of the Intel/MS segment.

In short - he is right: it is logical to assume, that arm will take significant portions of the market in the future.

Mar 19 04:39 AM

[stig:]

You are quite right. Intel lacks motivation for developing a serious competition to the arm processors, since atom by itself has turned out to be a big problem for Intel - since hardly anybody wish to use the more expensive (and larger profit-making) processors, anymore, The Intel "rules" about not using the Atom with large screen netbooks says it all - Atom is not only an asset, but also a huge problem for Intel. Why venture further along that road?

Besides, it is very difficult to see how Intel could muster up the expertice to outperform ARM in low-power consumption chips - ARM seems to have all the expertice in that area, after years of "owning" the mobile processor market.


On Mar 10 11:12 PM Miper wrote:

> Considering its strength in recent years it seems like Intel hold
> all the cards. Whether Mr. Castellano's predictions come true is
> anyone's guess considering the speed of technological advances.<br/>
>
> I think a bit of extra info on ARM evens the playing field more than
> people would think as little about ARM is mentioned in the article.
> Though ARM are comparatively small compared to Intel they are dedicated
> to processor research only and have consistently, for almost twenty
> years, beaten Intel time and again with advances in low power, cheap
> microprocessors. They license the chips to larger competitors of
> Intel who have the money to mass produce them and are not necessarily
> limited by the current US economic climate like Intel is. ARM chips
> are the dominant type of low power microchip with 98% of all mobile
> phones containing them. Projections suggest that 5 billion ARM chips
> will be sold yearly by 2011 with over 10 billion having already been
> sold worldwide. Considering ARM started off producing computer chips
> and still does produce some for RISC OS based machines, which in
> the 80s were some of the most powerful machines available, it is
> not implausible that they could return to their roots. Who knows,
> unlikely as it may sound, maybe Intel will admit its ineptitude in
> low power processors and settle its old grievances. And, like many
> other companies, it may turn to ARM licenses rather than pour more
> money into what it has been unable to solve so far.

Mar 19 04:54 AM

[vloscomp:]

How about MIPS? What makes ARMHD better then MIPS? Both has the same technology platform. Any opions, any one?

Jul 30 12:05 PM

[pageidea:]

I agree with the above comments, I think ARM will dominate the Smart-book market, just as it currently dominates the mobile communication industries. Companies such as Nokia, LG, Dell and Sharp are on the final stage of releasing a new Smart-book.

ARM will next challenge Intel core business, which is Laptop, desktop and servers and are in a very good position to take over Intel as a dominant player in the chip market.

Source:
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Nov 09 09:13 AM

[pageidea:]

I agree with the above comments, I think ARM will dominate the Smart-book market, just as it currently dominates the mobile communication industries. Companies such as Nokia, LG, Dell and Sharp are on the final stage of releasing a new Smart-book.

ARM will next challenge Intel core business, which is Laptop, desktop and servers and are in a very good position to take over Intel as a dominant player in the chip market.

Source:
pay as you go mobile phones website review and compare hundreds of pay as you go mobile phones from all major networks and from multiple vendors.

payasyougomobileph...

Nov 09 09:15 AM