Freescale chip targets sub-$200 netbook market

SAN FRANCISCO (Reuters) - Freescale Semiconductor Inc is moving in on the fastest-growing segment of the PC market, announcing on Monday a new chip for netbooks that are priced below $200.

The move is the latest sign that consumers can expect to see even cheaper netbooks in the near future. Although prices vary widely, the most popular models of these small, inexpensive laptops are now priced in the $300-$400 range.

"What they're (Freescale) targeting is definitely the way netbooks are going," said Phil Solis of ABI Research.

Freescale's new ARM-based chip is from its i.MX line, which is designed for various mobile devices. The company said the chip would allow a netbook with an 8.9-inch display to receive eight hours of battery life. Freescale's reference design features the Linux-based Ubuntu operating system.

The company did not give a price for the chip, which will be showcased at the annual Consumer Electronics Show in Las Vegas this week.

Netbooks have taken the PC world by storm. Research group DisplaySearch estimates notebook shipments at 14 million in 2008, up from less than 1 million in 2007.

Currently, Intel Corp's Atom processor dominates the netbook market, although competition is likely to heat up. Rival chip maker Advanced Micro Devices Inc will also unveil a chip for ultra-portables at CES.

The success of netbooks has stirred fears about segment cannibalization and pinched margins for PC makers.

Henri Richard, Freescale's chief sales and marketing officer, said the torrid growth of the netbook market made it impossible to ignore and that fears of cannibalization are overblown. Any company that refuses to get into the space is "making a huge mistake," he said.

"It's happening, it's there, it's real. And if you're not there to take advantage of it, you're going to miss big," said Richard.

Richard said some are predicting as many as 30 million to 40 million netbook shipments in 2009. DisplaySearch expects netbooks to make up 16 percent of the notebook market by 2011.

Richard, who left AMD in 2007 after spending seven years as head of sales and marketing, said Freescale's netbook offering is seeing "significant interest" from contract computer manufacturers in Taiwan.

"Since those guys never develop anything unless they have customers behind them, that must mean that some large market players are looking at the technology," he said.

Asustek, for one, has said it plans to release a netbook for as little as $200.

Austin, Texas-based Freescale was spun off from Motorola Inc in 2004 and taken private in a $17.6 billion leveraged buyout in December 2006.

The company's sales in 2007 totaled $5.7 billion.

(Reporting by Gabriel Madway, editing by Matthew Lewis)