Why Apple Scares the Wintel Vendors

by Tim Bajarin   |   August 1st, 2011

You might think that this is a trick question. On the surface, the answer should be the iPad and its eco system. But the iPad is a new category and while it is true they fear Apple’s potential of owning this market and making it hard to create products that are competitive, this is not the product that they fear the most.

The product they fear the most is Apple’s MacBook Air. When Apple first introduced the MacBook Air, a lot of the PC vendors thought it was a gimmick. While it was very thin and light it was very underpowered. And well over $1000. PC Vendor’s thin and lights (their definition, not mine) had broken $1000 and PC”s under $700 were dominating the overall market for laptops. And this first generation MacBook Air had no impact on their laptop market at all.

The only company to kind of take this Apple move serious was Dell, who created the Adamo XPS, supposedly their version of the MacBook Air. But while it was relatively thin compared to all of the other “thin and light” laptops on the market, it was also so high priced that people stayed away from it in droves. At least for the short term, Apple’s MacBook Air was considered the thinnest and lightest laptop albeit slightly underpowered and with Apple’s upper end pricing scheme behind it.

In the mean time, the demand for cheap PC’s started to take off. In fact, a new category of thin and lights called netbooks was all the rage for about two years. And while Steve Jobs considered netbooks toys, he watched its growth with interest. While he publicly said Apple would never make a netbook, it was pretty clear that Jobs and company had decided to make the next MacBook air lighter and thinner than a netbook yet as powerful as most mid to high end laptops. And, while their starting model is $999, their proprietary unibody casing and integrated graphics chips still make these the most powerful ultralights on the market today.

But when Apple also decided to kill their MacBooks, or their entry level laptops and only bring to market MacBook airs at prices close to their older entry level models, the PC vendors sat up and took note of this quickly. To them it signaled that Apple is getting ready to start a full out assault on what has been sacred territory for them. Sure, they can still create laptops under $500 and sell them all day long. But they also realized that Apple is now setting the bar for laptops at a new level by using the MacBook Air to help define the next generation of laptops and, they know that with Apple’s buying power and International reach Apple could price them even more aggressively in the very near future.

The PC industry itself had somewhat anticipated this and is working on creating what they call Ultrabooks, Windows based systems that are much like the MacBook Air. But the one that is on the market today that is the closest to the MacBook Air is the Samsung 900 3X which is priced about $1600 Euro’s in Europe and well over $1800 in the US. Apple’s comparative model is $1599. Although the Samsung 900 3X is a solid product, Apple’s lead in these types of “ultrabooks” along with their stores will help them sell even more of these in the future. In fact, in the last earnings call, Apple said they sold about 4 million computers in the last quarter and that 73% where laptops. And we believe that 75% of those where MacBook Airs.

Given the MacBook Air’s pricing and Apple’s apparent commitment to be even more competitive with the mainstream PC vendors with this model, signals to me that they really want more of the hallowed ground that traditional PC vendors tread today. And it looks like Apple is about to crank up their laptop supply chain prowess, industrial design skills and marketing and retail emphasis and will go right at the heart of these PC vendors most profitable laptop segment.

Oh yeah, and they will soon have their iCloud offering that will bring their eco-system in sync to their laptops and desktops as well, another value added piece of technology that I am sure will strike a chord with users. And given the possible halo effect of the new iPhone 5 when it comes out as well as the iPad and the iCloud, I am certain that Apple will drive even more people into their stores and will put an even greater effort on selling MacBook Airs and MacBook Pro’s in the future.

Yes, the iPad is a real concern for the PC vendors as Apple has a huge lead in tablets and strong demand. But if Apple starts eating into their laptop market share, this will have the greatest impact on these PC vendors in the future and make it even harder for them to make strong profits on this part of their laptop business.

Tim Bajarin

Tim Bajarin is the President of Creative Strategies, Inc. He is recognized as one of the leading industry consultants, analysts and futurists covering the field of personal computers and consumer technology. Mr. Bajarin has been with Creative Strategies since 1981 and has served as a consultant to most of the leading hardware and software vendors in the industry including IBM, Apple, Xerox, Compaq, Dell, AT&T, Microsoft, Polaroid, Lotus, Epson, Toshiba and numerous others.
  • Anonymous

    “…their proprietary unibody casing and AMD graphics chips still make these the most powerful ultralights on the market today.”

    A minor technical correction. Apple’s new MacBook Airs no longer use AMD’s graphics processors. They use the integrated GPU on the Intel Core i5 and i7 CPU.

  • Franklinguest

    Another thing to consider is the lackluster experience you get using a windows machine. People hate the structure of how things are organized. pc makers have no alternative to offering windows and that is a huge problem. So regardless of how light they make their machines, people love the experience of using an Apple.

    • http://twitter.com/DaQuantumFro DaMarico Fowler

      So if they could put out a skinned Linux distro or Chromebooks their problems are solved?

      • bbrewer

        No, that’s even worse than Windows as there is no commercial software (plus it’s also incredibly ugly, nearly as bad as Windows).

        • lairdp

          The chrome books (from Google partners) are an interesting take on this. Technically they’re linux laptops, but to users they’re stripped down to a web browser. So you turn it on, and you’re immediately online with access to web apps, with everything coming from the web. So, in a way that reminds me of the “network computer” pitch from long ago, they are the completely expendable hardware, so support costs are near-zero – if one breaks, take it back and hand out a replacement, with no patching, upgrades, installs, configuration, etc.

      • http://twitter.com/qka qka

        The PC makers tried Linux on the early netbooks. That didn’t last long. I don’t know how much of that was pressure from Microsoft, and how much of that was lack of interest by customers. Either way, history would repeat itself.

    • Ghost_soldier_1

      the way I see it, its all about taste…cuz I can build a piece to outclass a mac or I can have a mac pre-ordered to be a terror. Personally its all preference…both have pros and cons. I use a PC cuz I love to be able to customize, change and ‘ratch’ …if I want to add or change something it should be easy and painless…also the interface for mac is not what I would call enjoyable…however I believe it becomes an acquired taste…in other words after you get accustomed to it, its no longer a problem…a pc is the easiest to navigate in my opinion — I tend to figure stuff out quick and it took me a while to get the jist of mac….but i got it and I love some of its features (that are built in) unlike the pc (which you can still get).
      In terms of people blabbing about power…please…(not saying you did) at the end of the day be it mac or pc — it comes down to the following…processor — memory — space (and other aspects such as temp/cool etc.) – that being said as long as you can get a worthy processor and the other necessary items…wheter pc, mac, dog or cow it doesn’t matter. What i will say that a mac slaughters all in without a second thought is class and quality of its appearance…I mean when you see a mac it makes you think different and one has to respect that…as for me I am more functional than focussed on form so wherever function is at its best that is where I go.

  • jEN

    $1600 Euros? It’s time to locate the € on your keyboard, I guess.

    • bbrewer

      Or not. It’s just the Euro, after all.

  • http://www.facebook.com/profile.php?id=100000883421019 Christer Rosewell

    Umm, do you proof read?

    ” 73% where laptops. And we believe that 75% of those where MacBook Airs.”

    • http://www.thegraphicmac.com/ JimD

      You know proofread is one word, right?

      That being said, a typo once can be easily overlooked. The same typo twice in one line of text is no accident, and is nearly unforgivable when coupled with the early 90s-style 3D ray-traced Apple logo image used in the article. ;)

    • http://www.facebook.com/people/Vera-Comment/100002347335999 Vera Comment

      what’s the problem?
      of all Macs sold, 75% were portables. of the number of portables sold, 73% were MBA’s

  • Gprovida

    The problem that PC vendors have is making a profit. Apple is gobbling up the profit in PCs and the PC answer is lower prices and lower margins usually with lower quality. This is why consumers who care about quality buy Apple and Enterprise who don’t care buy PCs and even there they are getting clue. So from the “high” end consumer that is profitable they are being pressured by Airs and the cheapies at the low end are being pressured by iPads. And to add some irony, the cheapies in the tablet are being consumed but Amazon sell at near zero or a loss — leaving the industry with no oxygen.

    PC sales are down PC revenues are down, and profits are way down, with rare exceptions, Lenovo, that drive PC competition into further red or near red zone.

  • SockRolid

    iPad: undercuts low-end Wintel laptops in price.
    MacBook Air: undercuts high-end Wintel laptops in price.

    Apple already dominates the $1000-and-over PC market, and the Wintel PC makers are fine with that. It has no effect on their collective race-to-the-bottom. But now Apple is doing the unthinkable: they’re undercutting or hovering within easy reach of Wintel PC prices with many of their Mac models.

    The 11.6″ MacBook Air is Apple’s cheapest Mac now, and as you’d expect, it’s selling extremely well. The iMacs are only slightly more expensive than a similarly equipped Dell or HP, and also selling extremely well. And guess what. Tim Cook’s relentless improvement of supply chain economy of scale and manufacturing efficiency will continue. Apple should be able to keep its margins up for many more years, while maintaining or dropping retail prices.

    Apple has quietly become the world’s biggest corporate consumer of flash memory, and they’ll leverage that advantage in all of their products, from iPod nano up to the new Mac Pro. And they could very well use their volume purchases to get similar economy of scale on LCD and OLED screens, ARM-based Ax chips, and other critical components as well. Just a matter of time.