Chromebooks
Chromebooks have been around for longer than most would expect, with the earliest Chromebook coming from Samsung (005930.KS) (Series 5) back in June 2011, followed by the Acer (ACER) AC700 Chromebook only two months later after both were announced at the Google (GOOG) I/O conference in May and Google itself released the Google Chromebook Pixel almost two years later. Early reviews were uncertain that such devices had a place in the CE space when compared to laptops, but the lower pricing of such devices slowly gave credibility to their value. However there was relatively little excitement over Chromebooks until Google announced in 2016 that it would make Android apps available on Chromebooks via Google Play, but relatively weak Chromebook processors did not always produce expected performance results.
While Google assisted Chromebook marketing on a general basis, consumers had little understanding of the reason why one would buy a Chromebook, other than price, as the concept of working without Microsoft (MSFT) Windows™ was a bit hard to get used to, and some were wary about everything being stored ‘in the cloud’, particularly business information. As early as 2013 however the educational market began to recognize the value of Chromebooks, particularly the idea that a large IT department was not needed to maintain such devices, as all O/S updates were done automatically by Google and only a few applications were needed for classroom work. In 2013 1.8m Chromebooks were sold in the US, up from .4m in the previous year, with Google seeding classroom in the US and Europe, and in 2016 58% of the mobile devices purchased by schools across the US were Chromebooks, although concerns over the storage and use of student history information was a concern.
Chromebook sales in subsequent years followed seasonal patterns as niche devices, although the generational familiarity with the cloud and on-line computing generally seemed to establish Chromebooks as legitimate devices in the CE space. However the outbreak of COVID-19 in 2020 changed everything for Chromebooks as it pushed legislators across the globe to institute ‘school-at-home’ programs, with laptops and less expensive Chromebooks as the logical choices for remote learning. Of course, at the same time a better understanding of how much of the world’s population had/has access to broadband internet (currently 62.5%, up from 59.0% in 2020) was also made apparent as many locations were unable to support such projects as connections were slow or non-existant.
That said, Figure 1 shows the jump in Chromebook shipments during the onset and continuation of COVID-19 and the decline in those shipments as vaccine programs allowed students to return to classrooms more recently., We would expect Chromebook shipments to decline substantially on a y/y basis this year, returning to more seasonal patterns, although we expect the overall unit volume to be a bit higher than in the pre-COVID period as the global population becomes more used to cloud computing.
While Chromebook shipments are expected to decline this year, we were curious to see how Chromebook pricing has been affected by the weaker demand, and surveyed pricing history on Amazon (AMZN) for a variety of popular Chromebooks. We were surprised to find that current prices were on average near the midpoint between their historic highs and lows, currently 12.9% above the average low and 11.0% below the average high, as we expected more price pressure. When speaking with distributors about the pricing we noted that in almost all cases the reference point was higher component and transportation costs and in some cases higher inventory levels, but the view was that over the next few months some of those costs might be mitigated unless Chinese lockdown policy remains at current levels.
While we do expect Chromebook pricing to decline, particularly as IT display panel prices show similar weakness, the question remains as to the usefulness of Chromebooks to the general global population in a non-pandemic world. There are certainly a number of positives that make Chromebooks viable in many situations, although there are also a number of reasons why they fail to qualify as laptop replacements, which we look at below.
While Google assisted Chromebook marketing on a general basis, consumers had little understanding of the reason why one would buy a Chromebook, other than price, as the concept of working without Microsoft (MSFT) Windows™ was a bit hard to get used to, and some were wary about everything being stored ‘in the cloud’, particularly business information. As early as 2013 however the educational market began to recognize the value of Chromebooks, particularly the idea that a large IT department was not needed to maintain such devices, as all O/S updates were done automatically by Google and only a few applications were needed for classroom work. In 2013 1.8m Chromebooks were sold in the US, up from .4m in the previous year, with Google seeding classroom in the US and Europe, and in 2016 58% of the mobile devices purchased by schools across the US were Chromebooks, although concerns over the storage and use of student history information was a concern.
Chromebook sales in subsequent years followed seasonal patterns as niche devices, although the generational familiarity with the cloud and on-line computing generally seemed to establish Chromebooks as legitimate devices in the CE space. However the outbreak of COVID-19 in 2020 changed everything for Chromebooks as it pushed legislators across the globe to institute ‘school-at-home’ programs, with laptops and less expensive Chromebooks as the logical choices for remote learning. Of course, at the same time a better understanding of how much of the world’s population had/has access to broadband internet (currently 62.5%, up from 59.0% in 2020) was also made apparent as many locations were unable to support such projects as connections were slow or non-existant.
That said, Figure 1 shows the jump in Chromebook shipments during the onset and continuation of COVID-19 and the decline in those shipments as vaccine programs allowed students to return to classrooms more recently., We would expect Chromebook shipments to decline substantially on a y/y basis this year, returning to more seasonal patterns, although we expect the overall unit volume to be a bit higher than in the pre-COVID period as the global population becomes more used to cloud computing.
While Chromebook shipments are expected to decline this year, we were curious to see how Chromebook pricing has been affected by the weaker demand, and surveyed pricing history on Amazon (AMZN) for a variety of popular Chromebooks. We were surprised to find that current prices were on average near the midpoint between their historic highs and lows, currently 12.9% above the average low and 11.0% below the average high, as we expected more price pressure. When speaking with distributors about the pricing we noted that in almost all cases the reference point was higher component and transportation costs and in some cases higher inventory levels, but the view was that over the next few months some of those costs might be mitigated unless Chinese lockdown policy remains at current levels.
While we do expect Chromebook pricing to decline, particularly as IT display panel prices show similar weakness, the question remains as to the usefulness of Chromebooks to the general global population in a non-pandemic world. There are certainly a number of positives that make Chromebooks viable in many situations, although there are also a number of reasons why they fail to qualify as laptop replacements, which we look at below.
- Most work done on Chromebooks is done through the browser, which has become the de facto standard for smartphones, making it a very familiar environment for many users and there are almost innumerable applications that have been written to operate under Android, but each needs to be loaded locally on an Android device. Chrome, the OS under which most Chromebooks operate, runs applications remotely and will not run Android or Windows applications unless they have been ported to Chrome. This means that while many users are used to Android applications, they might not be as familiar with Chrome applications, which means there is a learning curve for those that are doing more than watching movies or playing relatively simple games.
- As Chrome is web-based, there is little need for storage on Chromebooks, as opposed to Windows, which runs many applications locally. This helps to keep costs down and for organizations, reduces the IT staffing needed to perform updates and solve application issues on Windows-based laptops and desktops.
- Thinking back to the era of ‘client-server’ or ‘dumb terminal’ computing, Chromebooks can be thought of as ‘smart terminals’ allowing users to interact with remote applications rather than doing much of the heavy lifting on the local device, but for those that need local computational power both the lack of storage and relatively weak processing capabilities usually rule out Chromebooks for those in media creation, financial modeling, and product design.
- Progress is being made by application developers to design software that allows power users to perform such functions on server-based hardware through Chrome-based devices, but many of those applications also need high-speed data transfer or the data movement will cause bottlenecks or require local buffering, so the introduction of 5G will help to alleviate that problem over time, but an internet connection is a necessity for Chromebooks, while laptops can be used in any location as long as the battery lasts.
Aggregated Chromebook Shipments - Source: SCMR LLC, Various
Best Selling Chromebook Pricing - 2020 - 2021 - Source: SCMR LLC, Amazon, Company Data
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