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5/25/2006
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Darrell Dunn
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Tech Giants, Nonprofits Make Ambitious Push With Cheap PCs

Intel, AMD, and others hope their efforts in the underdeveloped world will cultivate new and big markets for the future.

Billions of us have enjoyed the fruits of Moore's Law ever since IBM introduced the first mainstream PC 25 years ago. Falling PC prices and rising performance have buoyed businesses and consumers alike, elevating education, productivity, and prosperity. But not everyone has benefited. For every person in the world with a computer, there are more than two without one.

With every computing advance, the digital divide widens, pushing already disadvantaged parts of the world further down the opportunity curve. Now, after years of hand-wringing over the problem, the tech industry is addressing it. Researcher Nicholas Negroponte left a cushy job as head of MIT's Media Lab to pursue his dream of developing laptops that, at $100 each, are within reach of schools in remote parts of the world. And just last week, Advanced Micro Devices, Intel, Microsoft, and others put more of their skin in the game by promoting new models of PC distribution and financing that will put full-featured computers into the hands of people who otherwise couldn't afford them.

An early prototype of the OLPC laptop can run on good old muscle power

An early prototype of the OLPC laptop can run on good old muscle power


Photo courtesy of Design Continuum
Microsoft is leading a trial in Brazil under which thousands of consumers will be able to buy PCs at half the usual cost, then pay off the balance through hourly usage fees. Microsoft is teaming with Intel and AMD on the project, which will expand to China, India, Mexico, and Russia in the coming months.

Meantime, AMD, Intel, Microsoft, and others are investing billions of dollars in research, engineering, and marketing to target consumers in China, India, Latin America, and Russia, which represent promising markets for their products as growth slows in the United States, Europe, and Japan. They now recognize that the pricing, products, and distribution tactics that work in developed countries don't always work in the developing world. And if they're successful, they'll make some additional waves by creating work and educational opportunities in places where technology has made few inroads.

Microsoft began testing the new PC distribution model in Brazil last year. Under the pay-as-you-compute program, a PC running Windows XP with a 17-inch monitor that normally would sell for $600 will be sold for between $250 and $350, with 10 hours of usage time. Pre-paid cards available in stores give users additional time for about 75 cents per hour, says Mike Wickstrand, a director in Microsoft's market expansion group. When time expires, the PC enters a special limited mode and eventually will lock up unless users buy more time. The strategy is based on the belief that consumers won't settle for a stripped-down PC that lacks the features they already know about from Internet cafes and schools. "The person isn't making sacrifices," Wickstrand says.

Crank Them Up
The One Laptop Per Child initiative led by MIT and Negroponte takes a different tack. The goal there is to provide $100 laptops--including one that can be powered by a hand crank--to schoolchildren in developing countries starting next year. Another initiative, called pc-1 from processor maker VIA Technologies, already has seeded China, India, Vietnam, and other countries with tens of thousands of sub-$250 PCs.

Bringing technology to the developing world was a main focus at the World Congress on Informa- tion Technology in Austin, Texas, earlier this month. There, Hector Ruiz, CEO of home-town microprocessor maker AMD, outlined the company's 2-year-old 50x15 program, whose goal is to extend Internet access to half the world's population by 2015. Only 15% of the world's 6 billion-plus people now have Internet access, and at current growth rates it would be 2030 before half the world gets there, Ruiz said.

Much of AMD's efforts to date have centered on its Personal Inter- net Communicator, a hardened PC that uses the company's Geode processor and comes equipped with a 56-Kbps modem, an internal hard disk, and four USB ports. The system, which sells for less than $200 without a monitor, is being used in Brazil, the Caribbean, India, Panama, Turkey, Russia, and Uganda, says Billy Edwards, an AMD senior VP and chief innovation officer (see story, Johannesburg, Austin Benefit From Inexpensive Computers).

Intel CEO Paul Otellini used the World Congress to debut the World Ahead Program, under which the chip maker will invest more than $1 billion over five years to improve computing accessibility, Internet connectivity, and education in developing regions.

The Next Billion Consumers
There are more than 800 million Net-connected PCs today, and Intel will reach former CEO Andy Grove's 1 billion goal in 2007, a quarter century after the PC's birth. Reaching 2 billion Net-connected computers is achievable within five years, thanks to the perpetual decline in computing costs. "Forty-one years ago, a transistor cost $5 to manufacture," Otellini said. "Today, that cost is one-millionth of $1. It's now cheaper to produce a transistor than to grow a single grain of rice."

Reaching that next billion users also will require a very different business model for Intel. The company has enjoyed profit margins of 60% or better on PCs, but if it's to meet World Ahead's aggressive price points, it will need to accept much lower margins.

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