SAN JOSE, Calif. Notebook computers are on the rise and poised to surpass desktop PC shipments in 2009. But it's unclear whether a new class of ultra-low cost systems on the horizon will accelerate the growth or cut into the growing sector's profits.
Notebook shipments in 2008 will hit 136 million units, up 25.8 percent from 2007, estimated analyst Alex Yang of Lehman Brothers in a report issued Friday (Jan. 4). By contrast, desktop shipments will decline about 1.3 percent from 2007 to reach 143 million units.
In general, desktops have been on a path of single-digit growth in unit sales while notebooks have enjoyed several years of growth above 20 percent.
"Overall, we believe notebook PC makers will enjoy a prosperous year in 2008, while desktop PC makers might have to rely on a corporate replacement cycle, which could potentially start late in 2008," wrote Yang in the report. "We expect rapid notebook PC price erosion to continue generating new demand, and the narrowing price gap between notebooks and desktop PCs should also help increase the pace at which notebooks replace desktops," he added.
One of the big unknowns of the notebook market in 2008 will be the impact of a new class of systems priced below $400, emulating the Eee PC from Taiwan's Asustek Computer. The systems should start shipping by midyear and be broadly available from a variety of companies by the end of 2008.
"The key question is whether this sub-sector can expand the addressable market and enhance the notebook PC penetration rate, or whether will it merely replace the existing notebook market," wrote Yang. "The latter would be bad for the entire notebook industry[but] we believe that it is more likely that this new sub-sector will expand the notebook market," he added.
New operating system and processor releases will drive growth in notebooks in 2008. Intel is expected to release its first 45nm dual-core notebook processors soon, following up with quad-core chips before the end of the year, Yang said. If Microsoft ships updates to Vista on time, the software could trigger a corporate PC replacement cycle in the fourth quarter, he added.
Uncertainty over the supply and pricing of LCD panels is the biggest potential risk factor for notebook makers this year, according to Yang. Production costs in China and the vitality of emerging markets are other issues.
Recent changes in China's labor laws are causing many hardware companies to report they expect labor costs to rise as much as 25 percent, a fact that could shave a percentage point off gross profits, Yang wrote. If the economic slowdown in the U.S hits emerging markets such as Brazil, China, India and Russia that could also impact the computer market because these countries are driving an increasing amount of the market's growth, he added.
Among Taiwan's notebook makers, Yang predicts Wistron and Compal will reap the most benefits from growth this year with their unit shipments rising about 60 and 30 percent, respectively. Quanta and Compal were the big winners in 2007 with unit shipments up 62 and 56 percent, respectively.