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Low-cost general use PCs are becoming a reality with recent announcements from the MIT Media Lab and AMD (NYSE: AMD). Chipmaker AMD began peddling a US$299 PC designed for emerging markets at U.S. Radio Shack stores over the weekend.
AMD launched the the Personal Internet Communicator (PICs) in India about a year ago with high hopes of connecting 50 percent of the world's population to the Internet by 2015.
Meeting Demand
While China and Turkey are awaiting the PIC's arrival in the next few months, AMD decided to test the U.S. market now. The company figured there may be a demand for the sub-$300 computers with students and senior citizens who don't want to spend more than that on a traditional desktop computer.
Technology Business Research vice president Brooks Gray told TechNewsWorld that AMD has to ask itself two questions in its quest to bring its low-cost computing to the U.S. market. First, is it a profitable business model? Second, through what sales channels will it market the product?
"If AMD can't bring the chip down to $20 and the operating system down to an equivalent price point, or slightly higher, then I think there are some limitations here," Gray said. "On the other hand, I can buy a pretty good personal computer for $400 or less with a warranty."
Anatomy of Low-Cost Computers
Solectron, Seagate, Samsung and Macromedia (Nasdaq: MACR) played an integral role in the development and manufacturing of the PIC. It is designed to withstand the potentially harsh environmental demands of high-growth markets, which can include inconsistent power voltage, dust and dirt.
The PIC provides basic computing and Internet capabilities such as a browser, e-mail, word processing and spreadsheet, and the ability to view images, multimedia files and standard format documents. It runs the Windows CE operating system.
"My initial assessment is that AMD's low-cost computer will have limited traction in U.S. markets," Gray said. "I'm not sure if Windows CE provides the functionality or the stability that consumers are looking for."
Leveraging Open-Source Software
Analysts said AMD may have been better of leveraging an open-source operating system and tools to simultaneously bring the cost down and offer customers more functionality. That's what MIT researchers did with their $100 laptops set to be distributed in emerging countries in 2007.
The $100 laptop will be a full-color, full-screen portable computer that uses the cost-free Linux operating system. It will be rugged and powered by wind-up and other innovative sources of electricity for use in remote places.
It will come enabled for wireless and cell phone Internet access, and have plenty of USB ports to accommodate potential additional peripheral devices such as a printer. Its current specifications are 500 megahertz processor speed, one gigabyte of memory, and an XVGA display.
Targeting Emerging Markets
Analysts said a $100 laptop is more attractive in any market than a $299 computer. Two-hundred dollars is often seen as the critical point to gaining economies of scale across the electronics market.
"When you hit the $200 price point, you are looking at a much more
reasonable level of discretionary spending in some of the emerging markets,"
Gray said. "If I am really targeting the emerging markets, I am probably
not going to target them with a Microsoft (Nasdaq: MSFT) platform. AMD needs to look much
more closely at bringing some lower cost components into this if they want
to be successful in either market."
