CONTENTS

Enter the Ultrabook

Will Intel’s gambit to revolutionize mobile computing pay off? We take a look at this fresh laptop form factor’s chances in the Indian market. By Venkatesh Ganesh

Ultrabooks are the new kids on the mobile computing block. They seem to have the same swagger that netbooks had when they were launched in the last decade. When Apple introduced the Macbook Air in 2008, the vendor ended up creating a fresh category of personal computing devices. Almost three years later, a slew of PC makers have launched their versions of the Air, thin and lightweight ultraportable laptops that are powered by Intel processors.

October 2011 saw Acer, HP, Lenovo, LG, Asus, Toshiba and Samsung release their ultrabooks, which, according to these companies would breathe new life into laptop sales globally. While that logic holds true for Western markets where sales of desktops and laptops are declining, the same cannot be said about India.

Lenovo’s IdeaPad U300s marked the official launch of the ultrabook category in India. Apart from Lenovo, other players including Asus with its UX31 and Acer with its Aspire S3 have also forayed into this space. Global biggies like HP and Toshiba are yet to launch their ultrabooks in the country. According to HP executives, the Folio ultrabook will be launched in India in early 2012.

Early devices & expectations

The biggest issue confronting the ultrabook category in India is that of pricing. When it was introduced, it was priced close to $1,000 which, industry watchers felt was on the higher side. In October, Acer began shipping its Aspire S3 ultrabook starting at $899 and this device comes with a 13.3 inch screen, weighing 1.35 kilograms and uses an Intel Core i5 processor. In India, ultrabooks have been priced in the range of Rs 50,000 - 90,000.

"An ultrabook should satisfy three key demands—instant-on boot-up, extreme portability & good battery life." Nitin Khanapurkar Executive Director, KPMG

On the functionality front, analysts feel that these are early days for the ultrabook. “It should satisfy three key demands—instant-on boot-up, extreme portability and good battery life,” said Nitin Khanapurkar, Executive Director at KPMG.

While all of the vendors meet the first two expectations, questions remain regarding battery life. HP's Folio claims that it has the best-in-class battery life of all business ultrabooks with 9.5 hours. Others like Acer Aspire and Asus Zenbook, fall about 30% short when it comes to battery life with the Aspire claiming six hours and the Zenbook five . This is one of the key areas that need to be addressed as users are still unconvinced about the logic of having to pay a high price for average battery performance.

"The Aspire S3 is showing good traction in India. It integrates the best features of notebooks and tablets." Saji Kumar Head - Product Management, Acer India

Vendors are bullish, however. “The Aspire S3 is showing good traction in India. It integrates the best features of notebooks and tablets, offering users powerful performance in addition to ultra-fast responsiveness with Instant On, sleek design and Instant Connect features,” said Saji Kumar, Head - Product Management, Acer India.

Also, companies are targeting different segments with their ultrabooks. “We feel that customers in the SOHO and middle management or top executives of corporate organizations would consider it to be their preferred choice,” averred Kumar.

"The Folio is a business ultrabook with features like multi-touch. The obvious target segments would be SMBs & enterprises." Meraj Ahmed Country Category Manager - Commercial Business, PSG, HP India

HP, meanwhile, is targeting a different segment. “The HP Folio is essentially a business ultrabook with features like multi-touch. So, the obvious target segments would be SMBs and enterprises,” reasoned Meraj Ahmed, Country Category Manager - Commercial Business, Personal Systems Group, HP India.

Asus, similarly, is targeting the consumer segment and, according to Alex Huang, Country Head - India, System Business Group, Asus, “Representing the first generation ultrabooks, we expect to gain a good amount of traction with our Zenbook in the consumer segment. However, in the long term, we will target the enterprise segment,” he added.

Target segments

Industry analysts are of the opinion that the category of ultrabooks will open up new vistas for laptops. Margins are getting thinner by the day in the case of mid and low end laptops. This, coupled with the entry of tablets and other devices is leading to the cannibalization of notebook sales.

Tablets will lead the charge and iSuppli reckons that over 250 million units will ship by 2015. Overall, the notebook market is looking pretty healthy in the long run, as shipments of ultrabooks are expected to hit 136 million units by 2015.

Intel has the biggest stake here. A new report by iSuppli claims that ultrabooks will fail to hit Intel sales targets in 2012. As a result, shipments of traditional notebooks are set to decline over the next four years. Sales of traditional notebooks in 2015 will drop to 188 million from 217 million in 2011 and ultrabooks will hit 136 million units by 2015, according to iSuppli.

Intel has pinned its hopes on this segment and, according to the company, it is expected to make up about 40% of all notebooks shipped in 2012. This 40% target might be achieved in 2015, observed iSuppli. Now, with tablets eating their way into the netbook segment, Intel had to create another niche where it can be the dominant supplier of processors. Keeping this in mind, Intel is working with OEMs to come out with a host of ultrabooks next year. Faced with increasing competition from ARM-powered tablets and smartphones, Intel has its work cut out.

On the ground, there is positive news regarding the ultrabook on the device front. There are over 60 designs from OEMs that have been announced. UItrabooks from Acer, Lenovo and Asus are already on retail shelves in India, with several others expected to follow suit in the first half of 2012.

"We are investing significant amounts of money and other resources to create this category and accelerate its growth." Sandeep Aurora Director (Mktg.), Intel South Asia

“We are investing significant amounts of money and other resources to create this category and accelerate its growth,” said Sandeep Aurora, Director of Marketing, Intel South Asia. As a part of its initiatives in this regard, Intel recently announced a $300 million Ultrabook Fund from Intel Capital that invests in companies around the globe that are innovating in hardware, software, battery technology as well as design.

Acer is betting on ultrabooks in a big way. The PC maker posted a loss for the last two quarters, with revenue in the third quarter falling 30% year-on-year. This also resulted in Acer falling to fourth place, overtaken by Lenovo, according to IDC. Also, netbooks, where Acer did well over a period of time, are going through a crisis of sorts. In the last five quarters, starting from 2010 to the first quarter of 2011, netbook shipments have been 1.1 million in the US and the story of shipments abroad were equally bad dropping from earlier projections of 9.7 million to 6.8 million, according to Gartner. “Netbooks are in a precarious stage and pure play netbooks might not survive,” said Khanapurkar.

Acer India is readying its retail strategy. “Since, at the moment, it is about experiential buying, we are focusing on creating awareness of this category and selling these devices through our IT specialty retail stores and also through large format retailers,” pointed out Kumar. Similarly, HP, Lenovo and others have lined up their retail strategy, which would involve leveraging their own retail outlets and aligning with third-party retailers.

Recently, Acer’s President, Jim Wong, was quoted as saying that the company intended to ship 250,000 to 300,000 ultrabooks in the fourth quarter of this year and that prices would fall to $499 in 2013.

The economics of an ultrabook

One of the reasons for the cost of an ultrabook being on the higher side is to do with the SSD drives that are used in these devices. While vendors are not willing to talk about it in the open, they do admit that cost of an SSD is one of the principal reasons for prices of ultrabooks being high. In March 2011, Intel announced a new line of SSDs (SSD 320 Series) based on its smallest 25 nanometer circuitry, aimed at the laptop, desktop and server markets. The SSD 320 Series starts from $89 and goes on to $1,000, depending on the capacity. This, in turn, directly impacts the final product. While tablets can get away with relatively smaller SSDs due to the low footprint of Android and iOS the same cannot be said of Windows. It seems to be a chicken-and-egg situation as SSD makers felt that once volumes go up, prices would eventually come down.

Then there is also the issue of some functionality being abandoned due to the sleek body frame. With slender frames, which are often in the range of 11 to 18 mm, ultrabooks tend to abandon standard features like Ethernet and monitor ports, which are almost prerequisites in notebooks. However, since almost every ultrabook maker is positioning it for its pleasing looks, incorporating these features is becoming difficult.

On top of that, in 2012, with the launch of Windows 8, touch screen capabilities will be added to the ultrabook. This would add to the costs, opined industry watchers. As touch technology seems to be the way ahead, device makers have no choice but to embrace it.

“As the category evolves over the next couple of years, we expect the volumes to go up and volume economics to drive the cost down in order to meet the needs of the consumer,” said Aurora. Acer expects ultrabook volume to further accelerate in FY12.

According to Dr. C Rangarajan, Chairman, Prime Minister's Economic Advisory Council, India is expected to grow at 7 to 7.5% in FY 2012 and this is bringing cheer to PC makers. Also, in the third quarter of 2011, the desk-based and mobile PC market in India accounted for nearly 3.15 million units, a 13% increase from the third quarter of 2010, according to Gartner.

While these are positive signs, some technology and strategy issues need to stand corrected if ultrabook sales in India have to match vendors’ expectations. Right from functionality to the right price points, PC makers have to get their strategy right and soon.

venkatesh.ganesh@expressindia.com