MicroStar International (MSI), one of the world’s largest suppliers of computer hardware, recently disclosed that it plans to release a personal computer priced at about $300 in order to compete against Asustek Computer’s Asus Eee PC. While the decision will allow MSI to boost its production volumes, in the long term cut-throat competition on the market of inexpensive PCs may lead to further erosion of profitability.

The first low-end notebook from MSI will be based on Intel code-named Shelton processor/platform, feature 7” screen, work under Linux operating system and be priced at $300 - $310, Sambora Chen, a sales director of MSI is reported to have said in an interview with DigiTimes web-site. The manufacturer said it considered Microsoft Windows XP operating system for its low-cost machine and was also in talks with Advanced Micro Devices about a potential partnership.

After Asustek Computer’s Eee PC become more than successful in both Europe and the USA thanks to low price, many notebook makers started to mull their own affordable laptops. Some rumours say that Acer, Compal Electronics and Quanta Computer are on track to introduce their own low-cost systems in 2008, though, no details are present.

With Asustek, Microstar International and possibly other players on the market of affordable notebooks, the latter will have chances to become rather popular, as manufacturers are likely to boost functionality and performance of their systems to become more competitive. However, the competition on the market of laptops that are supposed to be very affordable will inevitably hurt profit margins of manufacturers, which are already low due to intense competition on mainboard and add-on-card markets.

Despite of enthusiasm regarding low-cost notebooks, its market prospects may not be as bright as some think today. While the product category of a low-end mobile system will indisputably exist, the market for such machines outside the developing countries may be limited due to performance and feature-set limitations of systems like Asus Eee PC.

Several years ago small form-factor (SFF) barebone PCs faced similar enthusiasm among early adopters as well as manufacturers. But nowadays SFF PC barebones are hardly popular, partly because many early adopters realized that they need features of a full-sized PCs, partly because renowned computer suppliers, such as Dell or HP, already have small systems in their lineups. The same may happen to low-priced notebooks: some customers will find that they need more functionality, others will return to personal digital assistants/smartphones.