synapsid_on_SI

ARM Processors Will Gain 55% of Netbook Market by 2012

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.

Analyzing Apple's iPod Business

I think it's important to consider the huge decrease in the price of NAND flash memory (virtually 1/4th of that one year ago or even lower). There is a lot of room for Apple to dramatically lower prices of flash-based iPods while still maintaining decent profit margins.

At the same time, the flash memory supply situation has reduced Apple's cost advantage for flash-based MP3 players. A few years ago when flash-based iPods were introduced, flash memory was in short supply and expensive and Apple's ability to secure supply contracts for flash memory at favourable prices meant that it was difficult for competitors to offer products significantly below Apple's ASP with the same capacity. However, in the current environment flash memory is so cheap that competitors can easily offer bigger capacity at lower prices. So Apple is relying more on brand name and other technology differentation to maintain iPod sales.

Skyworks' Success Yet to Be Reflected in the Market

SWKS has done well in meeting earnings expectations over the last two years, but I don't think you can characterize it as a "smartphone" pure-play.

SWKS has only one of four PA components in the 3G iPhone (selling for $1), while TQNT has three (selling for about $4.50). SWKS does have good exposure at RIMM. But generally 3G, which a lot of smartphones use, is not the area of greatest strength for SWKS at the moment.

As the company alluded to in their recent conference calls, they increased their market share a lot in the low-end segment for "single-chip phones" where they are providing the PA/front-end module. These partnerships with companies like MediaTek, TI and other baseband providers have been providing revenue momentum for SWKS and could be an area of strength (particularly MediaTek which saw very strong baseband shipments in the September quarter).

With the ecomonic crisis it's really hard to say how much SWKS will be affected. Accounts such as RIMM could be affected. In the low-end of the market some reports say that handset volumes won't be affected as much by the crisis as high-end handsets, which could be a positive for SWKS, but on the other hand price pressure for these PA components could increase.