The Atom Bang
Will Intel’s strategy to create affordable computing solutions with Atom processors succeed?
By Dhaval Valia
 It’s been just over three months since the launch of Atom and already there is an unprecedented buildup around it. Reportedly Intel expects to ship a billion Atom processors every year within the next decade—powering not just small form factor computers but also mobile phones, gaming devices, consumer durables and every other product imaginable that requires certain amount of computing power.
However, in the foreseeable future, by 2012, Intel expects to ship anywhere between 180 to 200 million units of Atom processors which would essentially power small form-factor mobile devices (ranging from 4-inch to 9-inch) which it has branded as Mobile Internet Devices (MIDs) and netbooks. This number amounts to nearly one-third of the 500 million Intel mobile processors expected to ship by then (see graph titled ‘Atom Projections’). To top it, Intel is expected to ship nearly 50 million Atom processors by 2011 that will power the new category of low-powered SFF desktop named as nettop.
The build-up around Atom can be gauged from the fact that worldwide, nearly 60 OEMs and ODMs, have launched their products based on Atom and many of them have set aggressive sales targets. Acer, for instance, has forecasted global sales of 6 million netbooks by end of 2008, itself. Asus, a beginner in the branded notebook space is betting on netbooks to corner a considerable chunk of the mobile computing market and thus become a significant player in the PC market. Asus plans to sell 5 million Eee PCs (its brand of netbooks) by end of December 2008, although it has only sold 5 lakh units so far, with a massive ramp-up expected from Christmas buying.
India plans
The Atom processor has been primarily designed for emerging countries like India where PC penetration is abysmal and hence Intel has been aggressively pushing its Atom strategy here. “India is the prime market for Atom processors. So far we have enabled six Indian OEMs to make their Atom offerings available in the market. We have helped them match-make with global ODMs to get their supplies and also validated their products for technical glitches. With MNC partners we are working closely to ensure reasonable allocations of their Atom products in India,” says Rajesh Gupta, Director, Sales, Intel India.
While ensuring enablement of OEMs, Intel has also launched a very ambitious mass campaign called Connected Indian, aimed at creating an ecosystem—consisting of various government agencies, telecom service providers, computer training institutes, and industry associations—to propel the spread of broadband, in turn preparing the ground for Atom-based computers positioned as Internet-centric PCs.
“Intel initiative aims to create a public-private partnership for the common cause of connecting a billion Indians. This movement is supported by the government, ecosystem partners as well as numerous other industry stalwarts. This coupled with affordable nettops and netbooks will increase PC penetration,” says Gupta.
Intel also recently demonstrated Atom-based nettop CPU (without display) at a starting price of Rs 5,000. It also announced collaboration with telcos like Reliance, Tata Communications and Tata Teleservices to promote netbooks and nettops through a strategic co-marketing program. The telcos will sell Atom PCs with their broadband solution through a financing scheme.
Intel along with NIIT, will make accessible special course on Internet education and PC fundamentals at all their training centers. Under this partnership, NIIT will also open up its centres across India to allow people to walk in and go through an introductory module on Internet. Both companies have also announced a scheme where first 10,000 citizens can avail of this module for free. A website www.connectedindians.com has also been launched where people can log on and support the movement.
“Broadband penetration is critical to the success of Atom which is positioned as processor that will power PCs for Internet-centric use and in light of this Intel’s industry wide initiative in promoting broadband becomes all the more significant,” reckons Diptarup Chakraborti, Principal Research Analyst, Gartner India. Gartner expects netbooks to constitute 10 percent of the Indian notebook shipments by end of 2009. It has forecasted sales of 4.5 million mobile computers by then.
Customer response
Intel contends that the initial response to the netbooks has been beyond expectations. “The product was launched worldwide in June and by July most OEMs rolled out their Atom-based products. The demand has been double than what we expected globally and now we are stepping up our manufacturing to meet this demand,” says Gupta.
Agrees Acer’s CMO S Rajendran, “We launched Aspire One netbook a month ago exclusively across all stores of Croma. The initial response to the offerings has been mind boggling. We are deluged with orders from our retailers and other partners across the country and as of now how much we sell is more a question of supply rather than demand. We would soon be launching more colors and would also be coming with a 160 GB HDD instead of the 120 GB, which we initially launched.” Currently Acer has launched a sapphire blue version of the Aspire One in two flavors—XP Home version at Rs 21,999 and the Linux version at Rs 19,999.
HCL, the first Indian OEM, to bring out netbooks and nettops also has aggressive plans. “We are presently in the ‘category creation’ phase. This is an entirely new category of products and hence there is lack of customer awareness. But as more and more OEMs roll out their products, we will see the awareness and the market grow,” says George Paul, Associate VP, Marketing, HCL Infosystems.
HCL has three ranges of netbooks in the market today—Mileap S series based on Celeron M, the mid-range Atom-based Mileap H and the high-end tablet Mileap V series—at respective prices of Rs 16,990, Rs 24,990 and Rs 34,990. “We have designed different models for different user segments like students, women and senior executives. Our experience has shown that the Indian consumer prefers hard disk and windows operating system and hence all our models come with HDD and OS,” adds Paul.
Commenting on the target audience for the new category of PCs, Rajendran says, “As of now we have gone into the market targeting the end-customer profiles that consist of tech enthusiasts, frequent travelers and people who desire an extra more-portable notebook that can be used for basic computing applications, listening to music, e-mailing and surfing the Internet. However going forward we foresee a lot of potential for this product category across segments specifically in education and in enterprise segment for sales force automation.”
HCL is already working on a few pilot projects with its large enterprise customers by customizing netbooks to cater to specialized applications required by a mobile work force. “We see a great demand for sales force automation coming from retail, insurance, logistics and FMCG sector,” says Paul.
Asus which has so far sold 10,000 units of its Eee PC has found buyers mostly among frequent travelers and early adopters.
Low focus on Nettops
So far, most vendors have been focused on netbooks. “That’s because there is tremendous growth in the mobile computing segment especially in the consumer segment. And most vendors are presently targeting the consumer space through retail with their netbook offering. We believe that nettops, in the short to medium term, will offer very attractive price points for the consumers with very basic internet centric usage requirements and at reasonably lower price. We will soon see vendors rolling out their models. Intex for one is very aggressive on nettops,” says Gupta.
However, vendors believe that nettops have very limited demand in the consumer segment at this point in time. And hence their focus is primarily on pushing nettops in the corporate segment. “A normal home user still wants the PC which is performance-rich. Rather than targeting home users, we are clearly targeting commercial segment where power consumption is becoming a major concern and usage pattern is an average office productivity workload. It also has smaller form factor which is a perfect way of saving office space,” opines Paul. HCL has launched its nettops under the brand Neutron available at an entry price of Rs 17,000. “Atom also lends itself favorably to the fast growing thin client segment,” avers Paul.
Asus too believes that nettops would be ideal for corporates who are increasingly focusing on green computing. “We have a product from the Eee family called the Eee Box. This is a compact little desktop CPU. The Eee Box is compact and easy to use while at the same time it is energy efficient. We’re looking at launching this device in India soon,” says Stanley Wu, Product Manager, Notebooks and Eee PC, Asus India.
Pricing issues
When the Atom processor was launched, it was touted to make computers affordable in order to reach the masses. However, so far, there is no sign of that. For instance, the full-featured netbooks with Windows OS and HDD are available in the range of Rs 20,000 to Rs 25,000. Similarly, nettops are available in the price band of Rs 14,000 to Rs 18,000.
“It is just the beginning and as economies of scale build up, we will see prices falling to more affordable levels of $200 to $250 as we have envisaged for netbooks. In Indian rupees we expect to see OEMs offer the entry-level netbooks in the price range of Rs 12,000 to Rs 14,000, within the next couple of quarters.
Gupta expects entry-level nettop prices to come under Rs 10,000 range going forward. “The onus for bringing down the prices also rests with other technology vendors mainly the display manufacturers. They will have to come up with market and technology innovations to ensure that prices of display helps bring down the prices below Rs 10,000,” believes Gupta.
However, OEMs don’t expect prices to come to levels Intel believes it will. “Prices are largely controlled by the technology owners. As the product category evolves, and as economies of scale build up, the prices would definitely plunge. However, we do not see netbooks prices to fall to the Rs 10,000 to Rs 12,000 range in the near future,” says Ashok Tripathy, Head of Personal Computing Division, Wipro Infotech.
Gartner’s Chakraborti is sceptical if the prices of netbooks will reach Intel’s target within the next couple of quarters. “PC components prices are already at rock bottom right now. I don’t see prices of any component going down substantially, at least in the short to medium term.”
Adds Rajendran, “The target price-points also need to contend with factors like forex rate, import duties and the recent rise in commodity prices, not to mention oil price which has had a multiplier effect on costs. But with volumes going up, we believe, having such target price-points is the right direction. This will help rapid adoption of computing in a larger sense, particularly in emerging markets like India.”
Intel, however, is keen to achieve target price-points as it is critical for the success of Atom especially in price sensitive market like India. “We realize that for Atom to succeed we need to create standardization in terms of terminology, configuration and prices. We will be working with our ecosystem partners to ensure such standardization,” says Gupta.
What next
Intel will start shipping the dual-core Atom processor for nettops to OEMs by end of this September. It will be supported by the Intel 945GC Express chipset and will add dual-core performance and scalability. For MIDs, it recently displayed the first MID silicon based on the next-generation “Moorestown” platform, due to go mainstream by late 2009. At the recently concluded IDF, the chip-major demonstrated its roadmap for the Atom line, shared the list of its growing ecosystem partners who are readying up their technology and businesses around the low-powered MID processor and talked up the various form-factors of computing devices it will power going forward.
Analysts believe that Intel has placed such high bets on the Atom range that they will do whatever it takes to make it work. Knowing Intel, it just would.
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