Hardware in Green, Blue, Black & Red

[dhilipkumar]

Conventional wisdom would have an industry with few competitors and commodity products to be rather dull, but 2008 was anything but dull for the major players in computing hardware.


We've seen big names toppled, others fall from grace, and some reborn as others wither or stumble. Even in sectors with just two competitors, competition remains fierce and brutal, with no room for complacency.As a result, there's no room for error. Even as these guys make increasingly complex parts, they have less time in which to do it. That's offset by the fact these companies have growing development teams, which helps, but still puts them under the gun.

This year, the industry found itself at the mercy of the economy, and next year is looking very painful for everyone. It's not a matter of if, but how bad it will be.

Mobile momentum

One of the biggest shifts all year was the crossover to mobility, leaving desktop PCs in the dust. Over the years, market research firms like IDC and Gartner have predicted that eventually, laptop sales would surpass desktop sales. Desktop sales had been trailing off while laptop sales grew, as laptops become more and more powerful, to the point of being as capable as a desktop for most tasks.

In recent years, that crossover point has steadily moved down, from 2012 to 2011 to 2010 and 2009. Well, it happened this year. In mid-2008, mobile computer sales surpassed desktop sales for the first time, and mobile computers are about the only bright spot for everyone involved, as desktop sales are flat.It's also good because laptops are higher margin products, and everyone in the supply chain desperately needs profit right now. The one potential spoiler is netbooks, which could in theory eat into the notebook market, which in turn means eating into profits.And yet, the high end thrives. When Intel began shipping the Core i7 processor, a.k.a. Nehalem, high-end PC desktop vendor Falcon Northwest had its busiest day in ages thanks to pent up demand, and it sells PCs that start at $2,500 and peak at $8,000. So for some folks, it's "Recession? What recession?" Lucky them.

The rise of the netbook

Plenty of folks tried to launch ultra mobile PCs, and without exception, they have been failures. The problem was always the same: the computers were crippled and fairly useless. People simply were not prepared to sacrifice a decent user experience on a crippled computer.

Thanks to the advent of Intel's Atom processor, a low power x86 derivative, netbooks finally got a processor they needed in order to offer decent performance. Atom became so popular that Intel (NASDAQ: INTC) couldn't make them fast enough.The result? Netbooks is taking off like a shot. IDC had previously projected netbooks to reach nine million units by 2012. Now it's saying we'll hit 11 million units this year and reach 41 million by 2012. Last year, just 500,000 netbooks were sold.

While this is great news for the vendors selling them – Asus in particular, as it is finally a player mentioned in the same breath as HP (NYSE: HPQ) and Acer, thanks to its popular Eee-PC – it's also bad news because netbooks are less profitable. A million Atom chips sold doesn't turn as big a profit for Intel as a million Centrino chips. The constant fear is that they will erode both desktop and notebook sales.Given how 2009 is shaping up, most of the vendors involved will be happy to sell anything.

It's easy being green

Green tech is everywhere, from the major hardware suppliers down to individual components. To some degree, it's driving by Silicon Valley values, where you see more Priuses on the road than SUVs around the valley these days. But, whereas many people pick the Prius because of what it says about them, there's legitimate reasons for the greening efforts of computers.Datacenters nationwide can't get any more power to run their systems. Computers are filling landfills and were made with a number of carcinogens like Arsenic and pollutants like lead and PVC. Power supplies were not terribly concerned with power efficiency. CPUs, hard drives and memory were more concerned with speed than running cool or low power.

The result isn't just funny commercials, although that is a nice benefit. From components to blade servers, vendors are working to eliminate harmful chemicals, make their old gear easy to recycle, and reduce the power draw of everything from a CPU to the power supply. These changes are often miniscule, but as Dell (NASDAQ:DELL) found out, with scale, tiny changes add up to big savings.