Monday, May 28, 2007

A Market for the poor

Often you'd find free-market proponents counter questions like “so, what about the poor?” by arguing that if the market is free enough it would, given time, service the poor.

The notion is of course true, for most things. A profit seeking company doesn’t mind where their money comes from as long as it arrives. So you’d find cheap version (sachet packets) of common consumer items like soap or washing powder.

It is generally conceded that the so-called ‘luxury items’ rarely compete in this consumer market.

The Mint reports on an interesting scenario where the likes of Microsoft and Intel are cramming for space in the Laptops-for-the-poor Market.

“A programme to provide millions of low-cost laptops to students in poor countries is set to start production in September even as commercial competitors prepare to offer even cheaper models.

The idea from Nicholas Negroponte, a co-founder of the Massachusetts Institute of Technology Media Laboratory, who proposed the project at the World Economic Forum in Davos two years ago, has moved closer to fruition.


“OLPC is in talks with Argentina, Brazil, Uruguay, Peru, Nigeria, Thailand, Pakistan, Russia, Rwanda and many other countries—but nothing definite just yet,” she said.
The new computers will not carry the symbolic price tag of $100 (Rs4,100), at least not right away. The first models will cost $175 and OLPC hopes the price will come down to $100 by 2009.

Negroponte wanted to have an innovative, specifically tailored laptop—called the XO— that would be very small, hardy, user-friendly and use the free Linux operating system, not Microsoft’s Windows, which dominates the world market.

The sharpest critic of the project is the world’s leading chip maker Intel Corp., which has dismissed the XO as a “gadget” and launched a rival commercial product.
Intel’s “Classmate,” manufactured in Taiwan, costs $285 and the price will drop to $200 at the end of the year, said Intel spokeswoman Agnes Kwan.

Several thousand units have been shipped to Brazil, Mexico and Nigeria, she said, and the target is 100,000 laptops by December. Pakistan has ordered 700,000 for 2009, she noted.

Aghast at this commercial rivalry, Olpc’s Negroponte said recently that “Intel should be ashamed of itself.” He accused the US microprocessor giant of selling the laptops below cost to destroy the XO, a charge Intel has denied.

Soon OLPC will have to contend with even more aggressive Indian competitors. The group Novatium Solutions Pvt. Ltd, based in Chennai, just brought out a basic “NetPC” for Rs3,280 ($80).

The market for the poor has become so enticing that Microsoft is preparing to launch a scaled-down software bundle of Windows and Office for three dollars for qualifying governments. ”

[Selected Quote: See full Article]


Oscar said...

Well, the market for these products won't be entirely free market. As the consumers will primarily be governments, who will bulk-buy these laptops to give away to schools etc, it's not the end consumers who are driving the market.

Intel and co are getting into this market because they know they can make big profits on government tenders. The dealmakers are gonna make good money when these laptops are bought by governments around the world.

Sadly, the rush to corner this particular market isn't driven by demand by consumers. It's driven by the potential for massive profits from government kickbacks.

Deane AKA ~CC~ said...


the channai reference is interesting though, the market seems to have reached the same maturity (possibly) based on demand before the MIT guys could get their act together.

Anonymous said...

yes oscar, but nevertheless the poor have been served haven't they...

Ankit said...

what would the poor do with laptops? isnt it a bit impractical. you see, even if the Governments give laptops away, what's the garantee some folks would not sell it? and what if something broke? will they use it as an expensive writing pad?