Taiwan Today

In early January this year, a gadget showcased by Acer Inc., Taiwan’s biggest PC maker, won “oohs” and “aahs” from the audience at the Consumer Electronics Show (CES) in Las Vegas in the United States. That was because Acer—the world’s fourth-largest PC brand after Hewlett-Packard Co., Lenovo Group Ltd. and Dell Inc.—showed off the Aspire S5, boasting that it was the “world’s thinnest” Ultrabook—a new breed of laptop computers that is taking on Apple Inc.’s super-slim, groundbreaking MacBook Air laptop. The 13-inch Aspire S5 measures less than 15 millimeters at its thickest point and all configurations weigh less than 1.4 kilograms. In comparison, the 13-inch MacBook Air measures 17 millimeters at its thickest point and weighs 1.35 kilograms.

In addition to its “ultra-thin” and “ultra-portable” design, the S5 is equipped with a “MagicFlip” panel, which conceals a handful of ports—HDMI for audio and video, and USB and Thunderbolt for connectivity to peripherals—below the machine’s display hinges. Pushing a button allows the ports to pop out when needed, but otherwise sit flush to keep the computer nice and slim.

“The Ultrabook is much more than just a product segment,” said Jim Wong (翁健仁), president of Acer, as he unveiled the S5 at the CES, one of the world’s major electronics shows. “It’s a new trend that will become the mainstream for mobile PCs, and customers will see its unique features gradually extended across Acer’s notebook family.”

Those still puzzled by the term Ultrabook need not fret. Generally speaking, there are currently three types of notebooks available on the market: traditional laptops, netbooks with screens of 10 inches or smaller and now the Ultrabooks. Traditional laptops are heavier and bulkier, but that size allows all-purpose models to start at around US$600, as expensive miniaturized components are not as crucial as in Ultrabooks. As of March this year, the least expensive Ultrabooks retailed for about US$800. Meanwhile, the computing power of netbooks is slightly compromised compared with traditional laptops, but allows them to sell at the super-low price point of around US$300.

Ultrabooks are high-performance laptop PCs introduced in the market in the last quarter of 2011. First unveiled at the Computex Taipei technology trade show on May 31 of that year, Ultrabooks are US chip giant Intel Corp.’s answer to the growing threat posed by tablet PCs—a market in which Apple’s iPads claim more than half of total sales.

Slim but Powerful

In essence, the Ultrabook phenomenon can be thought of as a slew of MacBook Air-like laptops made by a variety of manufacturers. Ultrabooks are lighter than conventional laptops because they employ a one-piece chassis that allows a larger battery to fit into a smaller case. They use low-power Intel processors with integrated graphics and typically have solid-state drives (SSD) for faster responsiveness; it takes them only about seven seconds to resume from hibernation and their batteries can typically last at least five hours. Most importantly, Ultrabooks boast computing power on par with their traditional, heavier notebook peers.

According to Intel, Ultrabook systems are set to “usher in a new era of computing and make everything else seem like ancient history” because these machines deliver a no-compromise computing experience. “This is what people want most out of their computers,” Intel says.

Market watchers share the chip maker’s belief that Ultrabooks will become the next “it” thing. Kirk Yang (楊應超), a Taiwanese analyst working at investment bank Barclays Capital in Hong Kong, says “2012 is the year of the Ultrabook. There will be high-growth opportunities for Ultrabooks similar to when netbooks were introduced in 2008. Intel Corp. has estimated that Ultrabooks could account for up to 30 percent of worldwide consumer notebook share in 2012.”

Reflecting Yang’s rosy outlook, US market researcher IHS iSuppli predicts that global Ultrabook shipments are likely to soar to 29 million units this year, which would constitute 13 percent of all worldwide notebook PC shipments. In 2011, fewer than 1 million Ultrabooks were shipped, accounting for just 2 percent of all shipments. By 2015, iSuppli estimates that shipments could more than quadruple to 136 million units, which would represent 43 percent of global notebook shipments. If shipments do reach those levels, Ultrabooks would be the fastest-growing segment of the PC market, iSuppli says.

Intel says early signs of momentum in the Ultrabook niche developed when models began appearing on the market in October 2011. More than 75 Ultrabook designs are in the pipeline for release this year and consumers will be spoiled for choice, as the laptops will come in a variety of shapes, sizes and styles, with screens of up to 14 and 15 inches in addition to the mainstream 12 and 13 inches.

This year, a second wave of Ultrabook devices will be powered by a new generation of Intel Core central processing units (CPU), code-named “Ivy Bridge,” which will become available in the second quarter and see increasing availability through the year. Compared with Intel’s current “Sandy Bridge” CPUs, the new chips are expected to perform 20 percent better, while their integrated graphics performance is predicted to show a gain of 30 to 100 percent.

Industry analysts say that continued innovation in the industry has been required to deliver the sleek Ultrabooks, given that components ranging from batteries, display panels and storage drives to cooling devices and motherboards all have to be redesigned to fit into the slim designs.

Intel’s global investment, merger and acquisition arm, Intel Capital, announced in August 2011 that it would pump US$300 million into its aptly named Ultrabook Fund to fuel development of components and designs. The company’s goal is to bring Ultrabooks to the market in mass volumes and at mainstream price points. Over a span of three to four years, the fund will invest in companies building hardware and software technologies for Ultrabooks. Some of those manufacturers come from Taiwan, which is known around the world as a technology powerhouse and famous for its design and manufacturing of computers, smartphones, flat screen TVs and related components. “We expect Asia would take up a big portion of the fund, given it has a pool of original equipment and design manufacturers and this is where many innovations are coming from,” said David Flanagan, managing director of mobile communications and infrastructure for Intel Capital, as he announced the Ultrabook Fund’s activation at a press conference in Taipei in August 2011.

Three months after Flanagan’s announcement, Intel Capital said it would invest a total of US$40 million in 10 Asian companies—including two in Taiwan—to capitalize on the rapid spread of technological innovation across the continent. Other investment recipients include companies from mainland China, India, Japan and South Korea that are developing technologies ranging from cloud-based services, green technologies, semiconductor design and manufacturing to security, social gaming and software.

The two Taiwanese outfits receiving an investment boost from Intel are Insyde Software Corp. and SNSplus Inc. Insyde, which leads in the PC BIOS (basic input/output system) field, is a provider of system firmware and software engineering services for makers of mobile devices, notebook PCs, servers and embedded systems.

SNSplus, meanwhile, is a publisher and distributor of social games with a focus on the Asian market. Its publishing platform provides bandwidth, customer support, localization services and servers to bring games to social networking sites such as Facebook.

While Insyde and SNSplus may not be big names in the global information technology industry, a handful of bigger players in Taiwan’s supply chain are also climbing aboard the promising Ultrabook bandwagon. Two of them are major contract manufacturers of notebook PCs—Wistron Corp. and Compal Electronics Inc. Wistron, which churns out laptops that bear the brand of clients including HP, Dell and Acer, expects Ultrabook shipments to account for more than 20 percent of its total notebook shipments during the first half of this year. Wistron declines to disclose projected shipment figures.

“Consumers have snapped up tablet PCs because notebooks offer them no new excitement,” Wistron president Robert Hwang (黃柏漙) observes. “The much-awaited launch of Microsoft Corp.’s new operating system, Windows 8 [slated to arrive in the second half of this year], and greater availability of Ultrabooks in the market might just change that.”

Wistron’s bigger rival Compal, currently the world’s second-biggest contract laptop maker after Taiwan’s Quanta Computer Inc., foresees Ultrabooks taking up some 20 percent of its total notebook shipments of 48 million units this year. Compal president Ray Chen (陳瑞聰) says that Ultrabooks will most likely account for 15 to 20 percent of global notebook shipments this year and will see greater momentum in 2013 and beyond.

“Currently, the lead time for an Ultrabook project is longer compared with that of a traditional notebook’s because contract makers are given more flexibility to come up with their own design interpretations,” Chen says. “That includes what type of materials we want to put into the casings and how we intend to present the unibody form factor to create the sleekness of the machines.” Unibody refers to casings hewn from a solid piece of material such as aluminum or plastic, while form factor refers to a notebook’s shape, size and style.

Acer, in particular, has been quick to define its own bevy of Ultrabooks as a “comeback” product line. Acer hit a rough patch in 2011, with the company’s finances plunging into the red for the first time in a decade in both the second and third quarters. The company also embarked on a round of organizational restructuring that led to the dismissal of chief executive officer Gianfranco Lanci in late March that year. The market share loss in the company’s European, Middle East and Africa sales division was largely responsible for Acer’s worldwide PC sales ranking falling from No. 2 to No. 4.

In a bid to reverse that decline, in the fourth quarter of 2011 Acer became one of the first PC makers to debut Ultrabooks, which the company is counting on to spur PC replacement demand. Acer differentiates its products by offering users a choice of either a hard disk drive (HDD) or SSD, according to company vice president Scott Lin (林顯郎). As much as 90 percent of Acer’s Ultrabook models in the future will come with HDDs, compared with most other makers, who offer only SSDs, Lin says. Although SSDs are faster than HDDs and are smaller, which would seem to make them a natural fit for Ultrabooks, they are more expensive and have less storage space, thereby adding to the price tags of products that cannot store as much data.

To increase the odds of its Ultrabooks becoming a hit, Acer says that starting from the second quarter of this year, all of its consumer PCs—including Ultrabook systems—will include its brand-new AcerCloud service. AcerCloud will deliver cloud-based storage that allows owners of Acer computers to access music, photos and documents stored on their desktop and laptop PCs on smartphones and tablets running the Android operating system, even if the PC is asleep or hibernating. The company also plans to allow users to access AcerCloud from Windows Phone-powered devices in the future.

Barclays Capital’s Kirk Yang believes that Ultrabooks could provide the big break that Acer needs. “We were impressed by Acer’s new product launches [at the CES], especially its Ultrabooks. We believe Acer’s Ultrabooks including the S5 should account for 25 percent to 35 percent of its total notebook shipments this year,” Yang says, adding that would constitute one of the highest Ultrabook market shares in the industry.

Boosting Momentum

Not to be outdone, Taiwan’s Asustek Computer Inc. is gearing up to promote its Zenbook series of Ultrabooks, with which the world’s No. 5 PC vendor hopes to boost its laptop sales momentum. At an investor conference at its Taipei headquarters in late February this year, Asustek CEO Jerry Shen (沈振來) said that he expected Ultrabooks to constitute as much as 20 percent, or 3.6 million units, of the company’s targeted total shipments of 18 million laptops this year. Shen also said that Asustek was set to cut prices for second-generation Zenbooks, due out in the second quarter, from the more than US$1,000 of the first generation to as low as US$699, which would help entice more consumers to buy the ultra-slim machines.

Price, of course, is as crucial for Ultrabooks as for any other market segment. “Ultrabook pricing will need to be lowered to about US$750 to gain broader acceptance, and vendors may be able to move closer to the target this year by finding cost savings in the [central processing units], storage and casings,” US investment bank Merrill Lynch wrote in a report in January. Yang believes manufacturers will find such savings and forecasts that some Ultrabook models could even be priced as low as US$599 in the third quarter, which would spur back-to-school demand greatly.

For now, premium prices and a lack of differentiation between Ultrabook models are likely to slow demand somewhat, but that could change when more innovative Ultrabook form factors and features are unveiled in the second half of this year, Merrill Lynch wrote. Such new features could include touch screens, gesture-based controls, voice recognition and near field communication technology, which enables mobile devices to communicate with each other when they are brought close together, the investment bank said.

A diversifying market for mobile devices such as Ultrabooks also gives PC makers reason to be cheerful. In the past, almost all companies in the sector had little choice but to adopt only the “Wintel” (a portmanteau of Windows and Intel) architecture, but more alternatives are becoming available in the industry and manufacturers are freer to mix and match chips and operating systems. For example, makers can now use low-power chips based on architecture licensed from ARM Holdings for devices running Google Inc.’s Android and Chrome operating systems, Shen says. The availability of hardware and software alternatives enables manufacturers to make devices at different price points and performance levels, which allow the targeting of a wider variety of market segments.

The Asustek CEO is definitely bullish about the opportunities provided by the expanding market for easy-to-carry devices like tablets and Ultrabooks. “The launches of our tablet PCs and the Zenbook last year were well received by consumers,” he says. “That makes us confident of securing a strong foothold in the challenging, fast-changing mobile device industry.”

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Jason Tan is a freelance writer based in Taipei.

Copyright © 2012 by Jason Tan