As component prices drop, the aggressive pricing of commercial Linux notebooks could hamper efforts by One Laptop Per Child to supply inexpensive laptops to children in developing markets.

Asus recently shipped its Linux-based Eee PC, and Everex on Thursday said it would soon sell Linux-based PCs with an x86 processor for under US$300. Those competitive prices may draw buyers to commercial laptops over One Laptop Per Chilld's (OLPC's) specialized XO laptops, which will carry a $200 price tag when it ships on Nov. 12, analysts said.

OLPC, a nonprofit organization, is hoping its low-cost XO laptop will revolutionize learning for children in the developing world. Afflicted with production delays and rising costs, the XO has jumped from its original estimated price of $100 and the effort now faces pricing competition from commercial laptops.

The progressive integration of hardware to include more features like graphics helped drop prices of commercial laptops, said Roger Kay, founder and president with Endpoint Technologies Associates. The price of LCDs (liquid crystal displays) fell because of stiff competition between suppliers, Kay said.

The increasing price of RAM was countered by falling prices of microprocessors, a result of heated competition between x86 vendors like Intel and Advanced Micro Devices, said John Greenagel, director of communications with the Semiconductor Industry Association.

The notebook market will remain strong as costs fall and commercial products could become great alternatives to the XO, Kay said. "People like the standard stuff, and if you can get it for nearly the same price, why go with the de-featured product?"

However, the XO is not targeted at U.S. kids or consumers, said Ben Bajarin, an analyst at Creative Strategies. India and countries in Africa have different usage scenarios and the XO laptop is geared more for them, Bajarin said.

Commercial laptops have a different value proposition and are meant for a different audience, Bajarin said. OLPC's XO has a Linux build with programs to educate children and charges batteries adapted for the local environment, using yoyos, solar panels and cow-powered generators.

The falling laptop prices won't affect OLPC though, according to Walter Bender, president of software and content at OLPC. In fact, he said that the Eee PC is a good development for the commercial industry. "The whole industry is moving in the right direction," Bender said.

The IDG News Service is a Network World affiliate.