It missed the action in smartphones and tablets, but Intel has finally woken up to the changing reality in the marketplace. Its vehicle to get back its space in the computing world, specially emerging markets, is the Ultrabook.
Intel’s chips power almost 80 per cent of the world’s personal computers (PC), and this segment constitutes almost 65 per cent of its revenue. But the growth of PCs in mature markets is sliding and in some of the emerging markets, the pace of growth has slowed down.
Analysts have already predicted that the second half of 2012 will see PC sales falling further. For the second quarter of 2012, PC shipments in the US were down 5.7 per cent, said Gartner. From a regional perspective, emerging markets and Japan registered low single digit-growth. PC market in Asia Pacific for this quarter declined 2.6 per cent, with the highest fall coming in from China. The only two bright spots in the APAC market were India that grew 17 per cent and Malaysia (21.6 per cent). In contrast, smartphone and tablet sales have been increasing. For the second quarter of 2012, smartphone sales were up 42.7 per cent.
Intel is now trying to break into this segment with its Ultrabook. Debjani Ghosh, managing director-sales & marketing group, Intel South Asia, says “Ultrabook is certainly Intel’s biggest bet. Personal computing as we know is completely changing. It is becoming pervasive and touching everyday work and personal life. We are reaching a point where we will see a multi-device play. I do not think desktop or laptop will totally go. There will be a much stronger evolution of smaller mobile devices.”
Intel’s expectations from Ultrabook is evident from the fact that it has created a $300 million fund. Ultrabooks, as Intel describes it, are very thin and light notebooks that combine traditional features of notebook like longer battery life with attributes like light in weight, touchscreen, instant responsiveness and much more. Close to 200 designs are ready on second generation chips.
But experts say Intel’s journey could be a tough one. Ultrabook has been a slow starter. According to IDC survey, a total of 500,000 Ultrabooks were sold in the first half of this year. In India, of the total laptops sold, Ultrabooks were just about 5-10 per cent.
“For a country like India where PC penetration is just about 5-6 per cent, price is a big factor. Ultrabook has not been able to break the ice precisely for this reason. Until prices come down to the existing notebook level of around Rs 35,000-40,000, volume growth is difficult. How Intel manages to break that barrier will be important,” says Sumanta Mukherjee, principal consultant, Cybermedia.
Ghosh however, says prices have come down from the first generation launch of Ultrabooks in October 2011 to now. “The first generation products were available in the range of Rs 80,000. But some of the second generation Ultrabooks are almost half that price. By the end of year, it will go down further and by next year it will be extremely mainstream. Plus more interesting form factor--touch, convertibles will enter,” says Ghosh.
But that’s just one part of the problem. Ultrabook has some serious competition in its attempt to get a toehold in the shift from PC to mobile. Since the iPad launch, the market is flooded with tablets from players like Samsung, RIM, Lenovo and others. In the mature market, US and Europe, consumers have preferred to buy tablets and smartphones than upgrade their PCs.
Also, unlike in the past, Intel has also realised that vendors are no more looking at it for exclusive tie-ups. For instance, Microsoft's Surface tablet will have both Intel and AMD version.
Experts say the other problem that Intel will have to address is the halfhearted effort put in by the vendor eco-system. Players such as HP, Acer and others have also started producing hybrid versions. HPs Sleekbook is a something that resembles Ultrabook but is not one. Acer too launched Acer Aspire V5 notebooks on Ivy Bridge.
“PC Vendors have slightly twisted the prerequisite Intel has specified for Ultrabooks and have created new category which is somewhat similar to Intel’s Ultrabook but comparably less expensive. PC players have realised that at the existing price, Ultrabook will not see a major adoption in a price conscious market like India,” says Vishal Tripathi, Gartner principal research analyst. (see box for Intel's spec for Ultrabook)
Also, with the rupee-dollar fluctuation, vendors are not in a position to bring down prices. This, many within the industry feel, would eventually mean compromising quality. More importantly, competition is also coming from rival Advanced Micro Devices (AMD), which announced the roll out of 'Ultrathin' notebooks and will hit the market by early Q3 2012. It has set its eyes on emerging markets and will be priced starting at about Rs 22,300 ($399) and onwards. That’s much lower than what Intel's Ultrabooks are priced at.
Tripathi agrees that among the emerging markets India does have potential to adopt Ultrabooks but there are hindrances. “One, consumers are still not sure what Ultrabooks are. Two, we have been hearing about the PC penetration increasing in India but that has not happened so far,” he adds.
Ghosh is aware of the poor penetration rate of PC in the Indian market, but believes that cheaper hardware is not the answer. “I agree our growth has been down. But a survey we did recently across different regions did not show that affordability is the key reason for adoption of technology But in India, a majority said that they do not know what to do with it. This is a very big problem,” adds Ghosh.
But Intel is not exactly sitting tight. With its Haswell chips, to be shipped next year, the company promises better graphics, and application performance. Based on this, Intel is talking about 10mm thin notebooks, with an improved battery life. Tech gurus who attended the IDF said some of the features that Intel is investing includes touch display technology, a Siri-like voice technology, hybrid ultrabook models where screens can be detached to become tablets and more.
The importance Intel attaches to India is obvious. After all, the company chose this market for the launch of Intel-powered mobile phones. Intel is working with Lava to bring down the cost of the mobile phones and will come out with new models that will hit the range of Rs 10,000 by the end of this year.
But it has to sort out the issues Ultrabook faces before it’s too late.
(Inputs from Priyanka Joshi)