ARM Netbooks Could Make OS X the Mobile OS to Rule Them All

Freescale and Qualcomm have already announced high-end ARM chips aimed at the netbook market. ARM chips are much cheaper and require a lot less power than Intel's Atom.

According to Freescale's marketing director, ARM netbooks should offer an 8 hour battery life. As the chips won't need a fan or heat sink, they can have a much thinner case, which should appeal to Apple's designers. It also makes sense to build them with flash memory, which again helps the battery life. Sample chips are available now, and volume production will start next quarter, so Apple could have its ARM netbook ready in time for the iPhone refresh.

iPod touch with a Keyboard

Look on these netbooks as a larger iPod touch with a hinged keyboard. At twice the length and width they would still fit into a large pocket. With a 7" screen the resolution would be 960 x 640 - four times the screen space of the iPod touch.

At $15 for Freescale's ARM chip in quantity, Apple should enjoy iPod profits rather than the usual thin PC or netbook margins. Freescale thinks Linux netbook prices could be around $200 but, with a wide range of apps, Apple could charge as much as the Windows netbooks and start at $399. These could include more memory than ARM-based rivals, because Apple buys flash memory comparatively cheaply.

It is easy to see Apple's advantages when comparing with one of the top selling Amazon Windows-based netbooks, which typically sell for $300 to $400 - roughly the same price as the 32 GB iPod touch. Microsoft will soon be reducing support for Windows XP, although it will continue to be sold on netbooks.

The lightweight Acer Aspire One weighs about 3 pounds with up to 5 hours battery life. An ARM netbook would be thinner, smaller, lighter, and have longer battery life.

If Apple can also take advantage of the battery technology in the new 17" MacBook Pro, the ARM netbook can either have a longer battery life or use a smaller battery for the same 8 hour charge, saving more weight.

Major disadvantages for some would be screen size and resolution, and a lack of disk space for storage.

Apple could use touch-based navigation, which works well on a small screen, very close to the keyboard. It would remove the need for a trackpad but could lead to a major tradeoff: iPhone apps are built around touch but, for instance, a 7" 960 x 640 capacitive screen with four times the space of the iPhone (which has a 480 x 320 display) may be too expensive.

Also, how many iPhone apps are designed to scale to higher resolutions? What has to be done to avoid fragmenting the app market between the current iPhone and devices with a higher resolution? As the current shelf life is short for many apps, does this even matter?

With Linux ARM netbooks, no meaningful comparisons can be made until the designs start appearing. Compared with Android netbooks, OS X has much more third party software.

The Android Marketplace had 800 free apps on Jan. 23, and on Feb. 13 it started to accept paid apps. According to Apple, the App Store has over 15,000 apps (over 20,000 according to mobclix.com), which in Jan. already had over 500 million downloads. By the time these netbooks. appear the gap will be even larger, as few new Android cellphones are scheduled for the coming months.

Competition

Who are the rivals?

While the biggest netbook companies, Acer and Asus, can build ARM netbooks, they would have to be based on Linux or Android, as the only version of Windows that works on ARM is Windows Mobile. Indeed, Asus has already started work on an Android system.

With Windows Mobile (WM) comes a browser based on an old version of Internet Explorer. Other programs that run on WM have been built for cellphones with much smaller screens and don't even run on the full range of WM phones. The next version, WM 6.5 (due this summer) has already been labelled by professional Windows Watchers like Paul Thurrott and Joe Wilcox as "too little, too late". So Windows Mobile is a very unattractive option for a netbook.

Nokia has the strongest carrier relationships, and many netbooks in Europe are being sold with a data plan by telcos. This looks like a natural extension of their current business. Choosing an OS, though, may not be straightforward, as this fits in with the Nokia Communicator which runs Symbian.

RIM (Blackberries) also could benefit from building on it's dominance of push email with a more business-oriented netbook.

Cannibalization of the Mac Market

How much cannabilization of the Mac market will there be?

Netbooks don't appeal to anyone who needs screen real estate to see a large amount of detail. So the market for 15" and 17" MacBooks is likely to be unaffected. It is the 13" MacBook and MacBook Air that are most likely to suffer reduced sales.

Most students going to college this year are likely to have even more restricted funds than usual. Netbooks therefore will appeal as a way of getting thru the next 3-4 years. In the September quarter, Apple didn't get the usual spike from this market, so MacBooks will be less and less of an option in this market.

Schools will continue to need a relatively rugged, well supported computer. However, as funds will be restricted, how much are they likely to spend on technology? The schools that do spend are likely to at least try out netbooks as a way of getting as many computers as possible for the money.

For many road warriors, an OS X ARM netbook would be the machine they could use comfortably when flying in coach class and commuting. It would be great for killing the email backlog. Most would want this in addition to a good laptop.

Consumers, the largest affected group, is likely to be switchers. In recent quarters (up to September) Apple Retail reported over 50% switchers, in the December quarter it was under 50%. This downward trend will continue while there is such a large gap between cheap, adequate netbooks and the cheapest OS X notebook. The temptation for a Windows user is to buy an XP netbook to wait to see what Windows 7 has to offer - and if they don't like it, they can always look at switching when the netbook fails.

In many families, older Macs migrate to younger members. There can be a real problem when one of the Macs dies or leaves home and the parents don't need a replacement. The simplest and cheapest solution for now is the secondhand Mac market on craigslist, eBay, etc. However, the OS X netbook would be a great alternative for most teenagers - answering needs for Facebook, IM, music, video downloads, a good selection of games (and the occasional piece of homework) - at less than the price of a recent secondhand Mac.

In summary, while Apple would see reduced sales of 13" OS X laptops, this will happen anyway with the current strategy. ARM netbooks will pick up many sales that otherwise would have been lost to Windows netbooks and will add new sales in at least some categories and certainly attract those who like the iPhone/iPod touch but want a real keyboard.

Losers

Who will be the big losers?

Microsoft will be the biggest losers. Intel Atom-based XP netbooks will have real problems competing against cheap ARM netbooks with a long battery life. Even if Windows 7 is better than XP Home, the first casualty is likely to be Windows Starter, which only allows three programs to run at a time. This will increase the pressure on prices for Home Premium. Losing a substantial part of the netbook market - the only fast growing PC market - will cut into Microsoft's revenue and control of the OS market.

Intel, at least in the short term. It expects to launch new 32nm chips next year, and as soon as it has a sufficiently low cost and low power consumption range, Intel can move into supplying mobile phones as well as netbooks.

AMD: Another nail in the coffin, as it doesn't have the funds for a fast move to 32nm and has largely lost control of the low-cost x86 market.

Winners

Who will be the winners?

Apple, if it takes full advantage of this opportunity. The competitors will appear anyway. At these prices and with all the advantages of an OS X netbook, switching will increase because it has no penalty for many potential netbook users, as much of their life is already on the Web. Apple can also start supplying carriers in Europe and elsewhere, which sell netbooks with a data plan. IDC is predicting 22 million netbooks in 2009, up from 11.4 million in 2008, so sales could increase by 2-3 million units a quarter. This would make the App Store even more attractive to developers, and add $1 billion to revenue.

RIM: A netbook with push email is likely to extend Blackberry's reach.

Nokia: A netbook helps to extend its carrier relationships and brings the company back into general computing in a profitable way.

Asus and Acer will continue their dominance of the low cost market, but this time with Linux or Android.