As we reported yesterday, global analysis firm IHS has revised its Ultrabook shipment forecasts down sharply for 2012, cutting them to just 10.3 million units for the year, rather than its original forecast of 22 million units.
At first glance that sounds dire, but the fault may lie more with iSuppli’s own forecast rather than any precipitous drop in Ultrabook popularity. Previous statements from the firm predicted a meteoric growth rate, with 72 million units shipping in 2013 and 181 million by 2016. Such statements were optimistic, to say the least, particularly in the teeth of grinding uncertainty and economic stagnation in both Europe and the US.
As usual, high prices have been trotted out as the major flaw in Intel’s Ultrabook strategy. IHS’ press release states that prices need to drop in the US market from the $1000 (£600+) level down to around $600 (around £400) in order to drive growth. Senior IHS analyst Craig Stice blames poor advertising, little consumer interest, and “prohibitively high pricing” for the forecast cuts. We disagree.
Price cuts alone can’t fix the problem
While it’s true that cutting Ultrabook prices would boost sales – that’s basic supply/demand 101 – we’ve already seen OEMs go down this road once before.
Over the past 12 years, OEMs have driven desktop and laptop prices into the ground, even when it meant slathering stickers on every inch of a system’s surface, compromising performance with ludicrous amounts of bloatware, and diluting their own trademarks. Computing became affordable, but the system you could easily afford isn’t one you’d actually want to use.
It’s true that Intel’s 60 per cent plus margins are partly responsible for the single-digit profit margins of HP and Dell. From Intel’s perspective, however, there’s not much reason to sacrifice its own profits to help out OEM partners when it knows any price cuts it gives out will immediately be squandered. Intel wants to sell a lot of processors, but it’s determined to prevent its cutting-edge CPUs from being reduced to commodity status. That’s territory that Chipzilla happily leaves to AMD. Price cuts that kick off pricing wars and reduce Ultrabooks to thinner, lighter versions of their bloated, slow brethren is exactly what Intel doesn’t want.
The intrinsic flaw in the “Ultrabooks are too expensive!” argument is that it assumes a high margin, low-volume product line is inherently a bad thing. Missing unrealistic sales numbers is not a failure (at least, not of Intel’s). One could even argue that a bifurcated market served by two companies (Intel with its high-end Ultrabooks, and AMD handling the lower “ultra-thin” category) is a bigger net win for consumers than one company providing a top-to-bottom solution.
But the bigger flaw here is the fact that PC OEMs only compete on price, and they’ve driven that competition well past the point where it benefits consumers. They’re intensely risk-averse, even though risk is an essential part of blazing new technology trails and spotting early trends. Every now and again, they’ll build something decently innovative (Dell’s Adamo is a good example), but the final product is almost always absurdly expensive or doomed to languish in a shadowy world of promised updates and aging technology.
The big box OEMs have not proven themselves particularly good curators of the PC experience. Intel certainly shares some of the blame; we’re not arguing that the company inherently deserves its enormous margins. Cutting Ultrabook prices, however, seems like the wrong way to fix the problem. We’d much rather see manufacturers spending money on developing the tools and software they need to make next-gen convertible Ultrabooks attractive, than see immediate price cuts.
Image Credit: IHS iSuppli