$899 MacBook Air taps Apple into massive $63B-per-year notebook market

Posted:
in Current Mac Hardware edited May 2014
Apple's new entry-level 11-inch MacBook Air is the company's most affordable notebook in its history --?an aggressive pricing move that one analyst has predicted will help the Mac further eat away at the largest segment of the existing Windows PC market.




Traditional Windows PCs thrive in the price range between $500 and $1,000, where some 100 million units are sold every year. Analyst Rod Hall of J.P. Morgan pegs this market segment as worth $63 billion per year.

With the launch of its updated MacBook Air models on Tuesday with a new, lower entry price of $899 for the 11-inch model, Apple has firmly placed itself in that massive segment of the notebook industry. The 13-inch variety of the MacBook Air has also dropped to $999, and both new models sport slightly faster Intel Haswell processors boasting all-day battery life.

Hall is encouraged by Apple's moves into the sub-$1,000 PC market, as he sees the company's lower-priced options potentially chipping away at Windows-based computers. The analyst has been pushing for Apple to Apple to target the $500-to-$1,000 market segment for some time.

Previously, Hall had suggested Apple should create a more full-featured version of iOS that would essentially bring keyboard and mouse support to Apple's mobile operating system. On Wednesday, Hall admitted that Apple's price cut on the MacBook Air lineup is a more "simple" method of addressing the huge sub-$1,000 market, as opposed to his own "more technically complicated" suggestion.




Hall previously said that about 55 percent of total notebook shipments in 2013 were estimated to have come from the price range between $500 and $1,000. That's equivalent to about 100 million of the 180 million laptops that were shipped last year.

AppleInsider has gone through the entire history of Apple's most affordable notebook models, revealing that the new $899 MacBook Air is in fact the cheapest portable Mac ever sold by the company. Apple has garnered a reputation for being a more premium-priced electronics maker than the rest of the PC market, and its Mac lineup has a long history of being priced well above $1,000.

Apple's first-ever battery-powered portable computer was the short-lived Macintosh Portable, which carried a hefty $6,500 starting price when it launched in 1989. In 2014 dollars, the 1989 Macintosh Portable would cost $12,386.

Apple did technically achieve an $899 price point with its legacy polycarbonate MacBook in 2011, but that device was only made available to education buyers and reflected discontinued hardware. Apple's new $899 MacBook Air is an updated model with a faster processor, and it's available for anyone to buy.
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Comments

  • Reply 1 of 67
    phone-ui-guyphone-ui-guy Posts: 1,019member

    Um, wasn't the MacBook Air already in this segment at $999?

     

    If anything, the real story is that they now have two models (11" and 13") in this segment. Not to mention that the price drop was on all models. So they brought down the 256GB SSD models to $1,099 and $1,199. It will be interesting to see how the price mix changes as people move up Market to the Mac.

  • Reply 2 of 67
    inklinginkling Posts: 762member
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  • Reply 3 of 67
    tallest skiltallest skil Posts: 43,388member

    Instead of Apple having 95% of PC sales above $1,000, they will now have 95% of PC sales above $900.

     

    Just that little bit of creep downward will terrify everyone else, but it’s not a market destroyer.

  • Reply 4 of 67
    ws11ws11 Posts: 159member
    Quote:

    Originally Posted by Tallest Skil View Post

     

    Instead of Apple having 95% of PC sales above $1,000, they will now have 95% of PC sales above $900.

     

    Just that little bit of creep downward will terrify everyone else, but it’s not a market destroyer.


    95%?...

  • Reply 5 of 67
    asciiascii Posts: 5,936member
    Macbook Air with the lid closed = new Mac mini?
  • Reply 6 of 67
    melgrossmelgross Posts: 33,510member
    Um, wasn't the MacBook Air already in this segment at $999?

    If anything, the real story is that they now have two models (11" and 13") in this segment. Not to mention that the price drop was on all models. So they brought down the 256GB SSD models to $1,099 and $1,199. It will be interesting to see how the price mix changes as people move up Market to the Mac.

    Yes, the 11" model started at $999. But now, the 11" model starts at $899, and the 13", which was $1099, is now at $999. That's a big psychologal difference. And a 10% price drop across the board, including for upgrades, is big enough to draw buyers. A 13" model for $999 sounds pretty good. It's got advantages other than a bigger screen such as a 12 hour battery life, as opposed to the 9 hours for the 11" model.
  • Reply 7 of 67
    melgrossmelgross Posts: 33,510member
    Instead of Apple having 95% of PC sales above $1,000, they will now have 95% of PC sales above $900.

    Just that little bit of creep downward will terrify everyone else, but it’s not a market destroyer.

    Why would it terrify anyone? Ten percent is a nice drop, but it's not so much that people are suddenly going to think that Airs are cheap.
  • Reply 8 of 67
    malaxmalax Posts: 1,598member
    Quote:

    Originally Posted by melgross View Post





    Yes, the 11" model started at $999. But now, the 11" model starts at $899, and the 13", which was $1099, is now at $999. That's a big psychologal difference. And a 10% price drop across the board, including for upgrades, is big enough to draw buyers. A 13" model for $999 sounds pretty good. It's got advantages other than a bigger screen such as a 12 hour battery life, as opposed to the 9 hours for the 11" model.

    I agree with that, but the graphic in this article and the overall thesis is misleading (not your thesis, the thesis of the article).  Look at what's highlighted on that chart.  The box surrounds the 5 $100 ranges between $500 and $1000.  The new pricing brings Apple into only the smallest and most expensive of those ranges (the $900-$1000 one) with a total of 4% of the market.  I mean it's a great move and all, but it's hardly a big part of the $63 billion core of this market segment.

  • Reply 9 of 67
    12" ARM based MacPad Air, Retina Screen, Keyboard, $899 coming soon
  • Reply 10 of 67
    While the price is attractive, I don't think this will eat into PC sales like AI thinks. for 600$, you can get a nice PC laptop that still has optical drives and twice the memory space. Apple seems to be stuck in the idea that everything will remain server side with cloud services, and computing will stay in the dumb terminal phase in the long run wit these products. The iPad is already slumping in sales, because people are not interested in buying a new tablet every 2 years like a phone. PCs should last a decent 5-6 years before needing replaced, even longer now that the wear on PCs is being shifted to tablets and phones.

    The price point for a plastic, bare bones mac should be 500-600$. Yet Apple still thinks they can be a PC competitor by having a high priced product, and then take everything out of it that people use daily. Currently, only ONE Macbook product comes with an ethernet port! IF everything's supposed to be cloud based, I would like to hard wire my Mac for streaming movies without the lag of wireless due to interference. Is it really that costly to include a gigabit ethernet port on a computer these days??
  • Reply 11 of 67
    maestro64maestro64 Posts: 5,043member

    I think what we are seeing is the ipod situation, they capture the top tier market and do not believe they will get any more buyers at those price points so they are now moving down the price curve to the next group. They did the same thing when the iphone came out,

  • Reply 12 of 67
    Even if it is right at the top of the range it might mean a huge difference.
    iPhones are right up there at the top of the price range and take like 80% of the earnings, right?
  • Reply 13 of 67
    Last weekend I stayed with a friend and she offered her windows laptop to me to check my email. God, was it ever awful! I thanked and used my iPhone instead.
  • Reply 14 of 67
    Quote:

    Originally Posted by sestewart View Post



    While the price is attractive, I don't think this will eat into PC sales like AI thinks. for 600$, you can get a nice PC laptop that still has optical drives and twice the memory space. Apple seems to be stuck in the idea that everything will remain server side with cloud services, and computing will stay in the dumb terminal phase in the long run wit these products. The iPad is already slumping in sales, because people are not interested in buying a new tablet every 2 years like a phone. PCs should last a decent 5-6 years before needing replaced, even longer now that the wear on PCs is being shifted to tablets and phones.



    The price point for a plastic, bare bones mac should be 500-600$. Yet Apple still thinks they can be a PC competitor by having a high priced product, and then take everything out of it that people use daily. Currently, only ONE Macbook product comes with an ethernet port! IF everything's supposed to be cloud based, I would like to hard wire my Mac for streaming movies without the lag of wireless due to interference. Is it really that costly to include a gigabit ethernet port on a computer these days??

     

    Most users do not need optical drives.  They take up space and also consume power.  Ethernet?  Really?  It is not needed either.  Streaming works just fine with wireless.  My entire house is wireless as is my corporate office.  I guess it is the difference between forward thinking and being stuck in the past.

  • Reply 15 of 67
    Quote:
    Originally Posted by sestewart View Post

    The price point for a plastic, bare bones mac should be 500-600$.

     

    They have this, it's called the Mac Mini.
  • Reply 16 of 67
    melgrossmelgross Posts: 33,510member
    malax wrote: »
    I agree with that, but the graphic in this article and the overall thesis is misleading (not your thesis, the thesis of the article).  Look at what's highlighted on that chart.  The box surrounds the 5 $100 ranges between $500 and $1000.  The new pricing brings Apple into only the smallest and most expensive of those ranges (the $900-$1000 one) with a total of 4% of the market.  I mean it's a great move and all, but it's hardly a big part of the $63 billion core of this market segment.

    I agree. But what I've found over the years is that people who want an Apple product are willing to pay more for what they consider an equivelant model from anyone else.

    What that means to me, is that with their old $999 11" model, they were really competing with those with small models prices as low as $700. But most of those Windows machines were really 13-15" machines. It's tough to tell someone to but an 11" Air instead of a 13-15" Windows machine. But now, that's just $899, and it's competing with even cheaper machines than before; as low as $650, or possibly even lower. That makes it easier.

    But more importantly, I think it the drop for the 13" model. Wherever the 11" was trying to compete, somewhat successfully, but not as much as would have been hoped, we now have a 13" model. So while people may have been willing to pay more for an 11", and be willing to settle for that small screen, they now see a model that competes more closely on size as well, and the psyological improvement there is immense. There are a lot of 13" models in that price range, and now, Apple will finally have a direct competitor.

    While I don't expect to see a major increase in sales, this could move sales by several percent, and that all that Apple expects. But if Apple's Mac sales move from an increase of 5% to an increase of 7%, that would be a big thing. And I'm pretty sure they have maintained margins. The case hasn't changed in any major way for years, nor the trackpad, etc. It costs less to manufacture now. This was a good thing.

    And, it will bring prices in line when they do come out with a retina model, pricing for which I'm really scratching my head about.
  • Reply 17 of 67
    herbapouherbapou Posts: 2,228member
    The price drop is not big enough to change much. Those macs will continu to be in a niche market.
  • Reply 18 of 67

    Huhhhhh? If you slide the red box in the graphic two sectors south to cover $300-$700 then you cover 75% of the PC market in which, price reduction withstanding, Apple still doesn't have a product to compete.......Am I missing a point here?

  • Reply 19 of 67
    macxpressmacxpress Posts: 5,796member
    Quote:

    Originally Posted by ascii View Post



    Macbook Air with the lid closed = new Mac mini?

    No, MacBook Air = Netbook. Call it what you want, but its just a simple netbook. I know this pisses people off and I'm an idiot, but really thats all it is, especially the 11" MBA. 

  • Reply 20 of 67
    tallest skiltallest skil Posts: 43,388member
    Originally Posted by WS11 View Post

    95%?...

     

    Yes? What about it?

     

    Originally Posted by melgross View Post

    Why would it terrify anyone? Ten percent is a nice drop, but it's not so much that people are suddenly going to think that Airs are cheap.

     

    It’s not for the cheap market. But it’s now for a cheaper market. Now, between a $600 PC and the $899 Air… more people are going to save up than before.

     

    Originally Posted by herbapou View Post

    Those macs will continu to be in a niche market.

     

    Nah.

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