To give the badly slumping PC market a much-need jolt, Intel is thinking about using one of the most effective tools in its arsenal: lowering chip prices.
Intel (INTC) chips can make up as much as 33% of a PC's cost, according to supply chain analysis firm IHS. That means the chipmaker has the power to lower PC prices drastically.
It might do just that. On a conference call with investors last month, former CEO Paul Otellini floated the idea of bringing $200 ultra-thin touchscreen notebooks to the market by the end of 2013.
Intel has been pushing the super-fast and super-thin ultrabook. But ultrabook sales have disappointed, with many pundits blaming price points of as much as $1,000.
A lower-end device that's similar to an ultrabook may be the key. Otellini was careful to note that a $200 device would have to use an "Atom" line of chips typically reserved for phones and tablets. That goes against Intel's strict definition of what an actual ultrabook should be, but those cheap ultrabooks could include other desirable features like a touchscreen and thin form factor.
IHS made the case that Intel can -- and should -- consider cutting the price of its PC parts to get to that $200 price point.
"A price point that low seems far-fetched considering the mobile PC prices of today," Craig Stice, IHS's senior principal analyst for computing programs, wrote in a recent report. But he pointed out that netbooks came down to $200 even at the height of their popularity. The small PCs enjoyed quite a bit of popularity before tablets essentially killed them in 2010.
A similar pricing model for ultrabooks could "support a no-frills type of ultrathin PC," Stice added.
PC makers would have to do their part as well, perhaps by sacrificing some profit margin to order to sell more PCs. But with the manufacturers on board, the industry may finally be able to stave off the tablet's cannibalization of the PC market..
At $200, an "ultrathin" or "ultraslim" type of device would be in line with the cost of those lower end tablets like the Amazon (AMZN) Kindle Fire or Barnes & Noble (BKS) Nook Tablet.
Richard Shim, a senior analyst with NPD Display Search, isn't convinced that a $200 touch PC is definitely achievable. But if it is, they likely still won't cannibalize tablet sales, he said.
"In markets that are already mature, a lot of people have both a PC and a tablet," Shim said. "And even in emerging markets, which have been the driver of growth for the PC industry and notebooks in particular, first-time buyers are being offered low-cost tablets that already pack a lot of computing power."
Stice, the IHS analyst, agreed.
"It would have to be a pretty notable turnaround for even these low-cost PCs to hurt tablets significantly," Stice said. "It's probably not a matter of media tablets cannibalized, but maybe a little more of a balance where PCs and tablets can live in the market together happily."
Even if a media tablet takeover isn't possible, the emergence of $200 ultraslim would be part of recent, much needed innovation in the PC market, Shim said.
"Before the ultrabooks and tablets, the market hadn't been that dynamic in the past few years," Shim said. "I think we'll look back on this year in particular and say it really laid the groundwork of change for the next few years."
