Why Are PC Manufacturers so Afraid of the Asus Eee?
By Hubert Nguyen, Posted on Feb 27, 08 05:43 PM PDT
At the Sony Open House, Mike Abary (SVP of Information Technology Products Division) shared his view on the Asus Eee and used the expression “race to the bottom” (in terms of pricing) to describe what would happen if consumers would go for ultra-cheap PCs massively. It is an interesting subject, and here is what we think of it at Ubergizmo: given the success of the Eee, it’s not hard to imagine why PC manufacturers keep an eye on the issue.
“Good enough” is a danger for PC Makers
High-end laptops are not going away but $400 laptops like the Eee could put the other sub-$999 laptops in danger, and the volume is huge in this segment. It is interesting to understand why consumers like the Asus Eee (and the likes) to see why there is a potential for a “race to the bottom”. We call it the “good enough” effect.
“Good enough” is the single scariest thing for all technology companies. They maintain their average selling prices (ASP) by improving functionalities (speed, storage…). Now, what if users’ needs do not evolve as quickly as the hardware? Average selling prices (ASP) would spiral down.
Software innovation is the key
To create more “needs” for the masses, the industry has to create new compelling and mainstream applications (like a new, slow OS with exciting features?) Unfortunately, PC makers have no control over that – software developers do. Additionally, many consumers are now using web-based applications, and the speed of these programs is often limited by the web – not by the PC. That’s one less reason to go for a fancier computer.
The Asus Eee is uber-popular because it addresses a strong demand: it is a light, small, cute and its performance is deemed “good enough” by buyers.
It would naive to think that ultra-cheap PCs are not a real danger for the gross margins of established PC makers: the market pressure is extremely strong: manufacturers are flocking to build these cheap PCs. Even HP is working on a small, but slightly more expensive one. Is Sony in danger? Not in the short term. Should they be worried? Certainly.
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Legacy Comments
By deyon , 19/05/08 12:57 AM (CommentID #684466)
i still know people buying Sony just cause its a Sony. Cause you like small PC's dont mean every one does. If SOny is charging 2grand for a over priced Laptop and people are buying it, good for Sony, I would do the same dam thing.
By Matt` , 18/05/08 2:07 PM (CommentID #683997)
How long do we really expect the current forms of computer to persist? When we get to the point where the horsepower for all our most common tasks can be squeezed into something a few inches across, who wouldn't want one?
Some things will continue to require a bigger machine, but for web access, office tasks, playing various forms of media... these things don't need a powerhouse.
As software develops, there will be some new developments that require more of a step up in power - if we wanted to each have our own AI PA for example, or full voice recognition. But the overwhelming trend for hardware is miniaturisation and decreasing cost. The logical conclusion is a tiny device that is immensely powerful by today's standards, and costs very little. At that point our desktops will be looked back on in the same way as we look back on the old "supercomputers".
By Ferns , 18/05/08 4:30 AM (CommentID #683589)
I agree in general with the article, however "Even HP is working on a small, but slightly more expensive one" reminds me that this is always a danger with manufacturers. Someone, Asus in this case, have a great product. Other manufacturers want in on the act, but they want an edge, so they introduce a couple of small must have improvements, and just a teeny price hike to cover that. Next one comes along and does the same, and on and on, and once again we're buying overpriced crap with feature sets we barely use fifty percent of, cell phones being a classic case in point.
By Dave , 16/05/08 6:06 PM (CommentID #681605)
YES! I love my eeepc - and I wonder why manufacturers consistently ignore the needs of the majority of PC users... Even uber-nerds can use a "good enough" machine they can keep in their back pocket.
Next up: PC hardware in a pocket-pc form factor.
By mtelesha , 28/02/08 9:01 PM (CommentID #519173)
This is not the answer for people who want only one computer but a great second computer.
By ManekiNeko , 28/02/08 10:16 AM (CommentID #518040)
You can't fight the future, and for the computer industry, the future is a small, low-cost system that doesn't suffer from resource overkill. Sony needs to accept that and drop the prices of its ludicrously overpriced laptops, instead of stubbornly sticking to the old ways of doing business.
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