White box notebooks poised for growth

The notebook PC segment experienced explosive growth in second quarter 2002. Increased demand in both the consumer and corporate segments contributed to the strong market activity. As processor and component technology advanced, new products continued to be released, which helped maintain healthy

unit prices, as well as contributed to strong revenues for vendors and resellers alike.

The demand among users for computers is similar between desktop and notebook segments. However, the key differentiator unique to the notebook segment is the benefit of mobility. The trade off for the convenience of mobility has been poor battery performance. The first half of 2002 saw technological advancements such as Intel’s Pentium 4-mobile chipset, which has a lower power absorption rate than previous versions. Combined with long-life batteries, faster processors, and intensive graphics chips, newer notebook versions level the playing field between desktop speed and notebook functionality. As consumer product awareness multiplies, the market opens up for notebooks. Second quarter 2002 results were a continuation of the market growth.

Total notebook shipments in the second quarter 2002 were 151,800, up 17 per cent over 2001. This year, 2002, is expected to finish with 752,300 units, up 26 per cent over 2001. Both corporate and consumer notebook shipments were up over previous quarters, as the segments experienced explosive second quarter growth. Commercial notebook shipments represented the lion’s share of all units in second quarter, with 92,300 units, up seven per cent from 2001. The year is expected to finish with 407,600 units, which will be up 10per cent from 2001. Consumer notebook PCs finished Q2 up 38 per cent from 2001, with 59,500 units. Annual shipments are forecasted to be 344,600 units, up 52 per cent from 2001.

Both corporate and consumer markets were dominated by global branded units. Companies such as IBM and Toshiba represented large portions of unit share in the first half of 2002. However, as the market grows and matures, look for white box vendors such as Eurocom, TTX, IPC and Angel Computers to increase their presence. As the demand for notebooks picks up, the time is opportune for Canadian branded vendors to acquire market share.

White box vendors have a unique position within this segment. Representing approximately six per cent of first half 2002-notebook shipments, white box providers have maintained an overall steady presence in this segment. Organizations have established supplier contacts, perfected assembly methods, established and increased brand trust and recognition. As IT purchasers turn to mobile solutions, global vendors are looking to increase market share; as are white box vendors. As IT users and purchasers become increasing comfortable with the technology, buying Canadian is an increasingly attractive option. Purchasers cut their teeth on globally recognized products, focusing on the comfort of an internationally recognized supplier, now they can move to a more customized configuration offered by Canadian assemblers.

A recent survey of IT resellers conducted by ERC found that operational issues such as availability, support and pricing were of the highest significance to the reseller. White box vendors specialize in the operational concerns. It is these operational strengths combined with the increased notebook market activity and product demand that make the mobile segment open game for all to increase share. As the Canadian notebook market continues to experience tremendous demand, white box assemblers are provided with an ideal time to snap up more share. As we push through the second half of the year, consumer purchases are expected to boost the market, which should nicely lead into the corporate push of Q1-2003.

Michelle Warren is a market analyst at Toronto-based research firm Evans Research Corp.

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