Intel's Atom processor and chipset business revenues dropped 32% on year to only US$269 million in the third quarter of 2011, indicating that the netbook market has been strongly impacted by tablet PCs, according to sources from PC players.

In the past, Intel's Atom N series processors were able to account for close to 95% of the netbook CPU market, but as demand for netbooks continues to drop, several notebook vendors have already turned to purchasing AMD's APUs as they are cheaper, and feature better performance. Some players have brought panel sizes up from 10-inch to 12-inch, while maintaining price at US$399 to attract consumers.

Facing downstream partners reducing the number of netbook projects, while turning to AMD's APUs, Intel's revenues from Atom business are likely to continue dropping each quarter.

However, the sources believe netbooks will not disappear, but will rather enter emerging markets. The average price of a netbook is also likely to drop from US$300 currently to about US$200-250 with the share among total notebook shipments drops from 20% at the peak to less than 5% in the second half of 2012.

Due to the weak netbook market, Intel, which was originally set to launch its new Cedar Trail-M-based Atom N2800 and N2600 processors as well as Atom D2700 and D2500 in September, still has not yet released the CPUs, and no PC vendors have yet confirmed they will adopt these CPUs for products.

Intel announced third-quarter revenues of US$14.2 billion, up 9% sequentially and 28% on year. Profits also increased 17% both on year and on quarter to US$3.47 billion. The company's EPS was US$0.65 and gross margin was 63.4%.