Why Are PC Manufacturers so Afraid of the Asus Eee?

At the Sony Open House, Mike Abary (SVP of Information Technology Products Division) shared his view on the Asus Eee and used the expression “race to the bottom” (in terms of pricing) to describe what would happen if consumers would go for ultra-cheap PCs massively. It is an interesting subject, and here is what we think of it at Ubergizmo: given the success of the Eee, it’s not hard to imagine why PC manufacturers keep an eye on the issue.

“Good enough” is a danger for PC Makers

High-end laptops are not going away but $400 laptops like the Eee could put the other sub-$999 laptops in danger, and the volume is huge in this segment. It is interesting to understand why consumers like the Asus Eee (and the likes) to see why there is a potential for a “race to the bottom”. We call it the “good enough” effect.

“Good enough” is the single scariest thing for all technology companies. They maintain their average selling prices (ASP) by improving functionalities (speed, storage…). Now, what if users’ needs do not evolve as quickly as the hardware? Average selling prices (ASP) would spiral down.

Software innovation is the key

To create more “needs” for the masses, the industry has to create new compelling and mainstream applications (like a new, slow OS with exciting features?) Unfortunately, PC makers have no control over that – software developers do. Additionally, many consumers are now using web-based applications, and the speed of these programs is often limited by the web – not by the PC. That’s one less reason to go for a fancier computer.

The Asus Eee is uber-popular because it addresses a strong demand: it is a light, small, cute and its performance is deemed “good enough” by buyers.

It would naive to think that ultra-cheap PCs are not a real danger for the gross margins of established PC makers: the market pressure is extremely strong: manufacturers are flocking to build these cheap PCs. Even HP is working on a small, but slightly more expensive one. Is Sony in danger? Not in the short term. Should they be worried? Certainly.

Run Mac OS X On Your Asus Eee PC

As if the comparisons between the glossy white Asus Eee PC and a MacBook weren't obvious enough already, you can now hack the former to run the latter's operating system. Some guy named Dan has managed to install Mac OS X on the Asus Eee PC, opening up the doors for all sorts of Apple-flavored love.

Naturally, this hack falls into a legally gray area, so you'll want to proceed with extreme caution. You also have to bear in mind that the build of Mac OS X floating around on BitTorrent isn't exactly legal either, although the PC-patched copy makes for a "moderately easy install." Based on the specs on the Asus Eee Pc, you'll probably want to stick with Tiger rather than Leopard.

With all this hacking and modding, you've got to wonder why Apple hasn't created a more compact version of the MacBook to compete against this beautiful UMPC. Call it the MacBook Nano and it'd sell like hotcakes.