Chipmakers Feel the Pinch Created by Low-cost Netbooks, Notebooks

From DailyTech: Notebook computers are becoming the majority of computer system sales for many computer makers. With notebooks being such a large portion of sales a decline in notebook shipments and overall weakness in the segment can put a significant strain not only on the computer maker, but on chipmakers as well.

Reuters reports that the poor global economy is starting to be felt by chipmakers. Notebook makers and component suppliers in the U.S. and Asia are reportedly seeing declining order amounts and outright order cancellations. The orders that are being placed and the machines that are being purchased by consumers are skewing towards the low-end, low-cost netbook and notebook market.

At first, the netbook was cited by research firm IDC as a savior for the notebook market and was credited with helping to keep the market afloat in the tough economy. It didn’t take long for the realization to set in that the increasing sales of low margin netbooks would eat into the profitability of notebook makers and chipmakers. That reality is now setting in and analysts are changing earnings projections for some of the largest firms in the IT industry.

JoAnne Feeney, a chip analyst with FTN Midwest Securities, told Reuters, "Clearly the economic slowdown is spreading to notebooks and we're seeing it in two ways. One is in lower unit shipments, but also a mixed shift to cheaper units. And that's going to filter down through the semiconductor world."

Feeney says that Q4 shipments for notebook processors are expected to drop 5% to 10% from numbers in Q3. Previously the forecast predicted an increase for Q4 of 10% to 15%. She also expects to see price cuts from Intel as it tries to compete on price with rival AMD. Demand is shifting to lower cost notebooks, which is a market AMD is typically very strong in.

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