Samsung Chromebook: Embodiment of Disruption
Yesterday, the ARM-based Samsung Chromebook threw its hat into the ring as competition to Apple’s Macbook Air and Microsoft’s line of Windows 8 powered notebooks. In many ways, this product is the tangible embodiment of disruptive competition, especially on two fronts:
- The Core Processor: ARM chips have followed what we have described as the classic disruptive trajectory — that is, they started out in a low-end niche market, were ignored by the market leaders, grew in capability and profitability (the disruptive hockey stick graph), and are now leaving the x86 market leaders — Intel and AMD — scrambling to catch up. For a quick history, ARM was not as powerful as its x86 brethren, but it was much more efficient. As ARM was being developed in the 80s and 90s, efficiency was not nearly as important as horsepower (the desktop and laptop markets were where the big money was). Money in the computer market was being made as Intel and AMD raced each other to hit speed benchmarks. However, ARM embraced a market x86 ignored — the small, but emerging mobile market. As mobile devices became more powerful, ARM chips evolved. However, they always focused on efficiency, an absolute necessity for small devices not plugged into the wall. As ARM chips scaled up, Intel soon realized it had a problem on its hands. It tried — and failed — to get into the mobile market. It quickly redoubled efforts to develop more efficient chips for use in smaller devices like netbooks and tablets with the atom processor. As the line between mobile devices and computers blurred, ARM and x86 collided head on in the tablet space. In fact, Microsoft now offers both an ARM-based and an x86-based version of its Surface tablet. However, as usually is the case, the old incumbents are a step behind the disruptive entrant. Currently, ARM chips comprise nearly 30% of the overall semiconductor market sales versus Intel’s 16%, and ARM’s CEO recently set his targets for 60% of the worldwide market. (It is worth noting, ARM has a business model focused on licensing its technology and does not play in the lower margin manufacturing game, a model that AMD recently followed to streamline its global operations to better compete with Intel.) As ARM steps into the laptop market, as it is doing in the new Samsung/Google Chromebook and did last year with its Linux OS netbook, it ventures smack into the x86’s home turf. Although I wouldn’t write off Intel just yet. With a track record of aggressive innovation, $50 billion in annual revenue and $10 billion cash on the books, Intel is not ceding its territory. (For an examination of why ARM is disruptive see FernStrategy’s great piece on the subject.)
- The Operating System: It has long been theorized that the browser would overtake the classic installed operating system in modern computers and smart devices, especially as the Internet rapidly scaled up from being a cool application to the central nervous system of your computer. In fact, the Justice Department’s antitrust lawsuit against Microsoft was predicated on this very theory — aka “Monopoly Maintenance”. (In short, the DOJ argued that even though Netscape was not a threat to Microsoft’s Operating System revenues at the time of the case, it was a threat to eventually disrupt the traditional operating system.) As cloud-based applications and services displace locally installed applications, the browser, not the traditional operating system, becomes the “operating system” of the 21st century. When Google announced Chrome OS, based on its web-browser, the future was in sight (let’s not forget the ghost of Netscape still lives in Firefox’s recently launched Operating System). As the online and offline worlds merge, the king of the desktop (Microsoft) and the darling of the Internet (Google) will be engaged in a cut-throat battle for the Cloud. Just as in the microprocessor story, all bets are off as to who will win. One thing will be sure though, it will be a hell of a fight.
As a short conclusion, and an example of why disruption is a good thing, the average price of a laptop in 2000 was around $2000. And the price for the new Samsung Chromebook: $249. As one reviewer at ZDnet put it:
What makes the new Samsung Chromebook so disruptive in this writer’s view is the outstanding performance, maximum portability, and the low price. This new laptop works better than the previous model, the Samsung Series 5 550 for half the price. Those on the fence about Chrome OS should find the $249 price a good incentive to give it a try.