Product of the Year: Asustek's Eee PC

At 9 inches wide and weighing in at just 2 pounds,Asustek's pint-size Eee PC doesn't look like a heavyweight contender.But the ultraportable notebook, dubbed a "netbook" for itsInternet-centric applications, has delivered what may end up being aknockdown blow to the global PC industry.

Masterminded by AsustekChairman Jonney Shih and Chief Executive Jerry Shen, the classicallydesigned $300 to $400 Eee PC aimed to reach what was viewed as anunderserved demographic: young children, seniors and otherinexperienced notebook users. These were people who didn't need a fullPC but didn't want a toy. What's happened is that the Eee, once thoughtto be an extra revenue stream for the then largest motherboardmanufacturer in the world, has transformed the Taiwanese company andchanged the global PC industry along with it.

When the Eee PC was released last year, Taiwan's supply sold out in30 minutes. Demand continued to outpace supply after a worldwiderollout, and the company was surprised that many buyers already hadcomputers. It became the number one "Most Desired Gift" on Amazon.com (nasdaq: AMZN - news - people )during last year's holiday season and, eventually, a Harvard BusinessSchool case study. By the end of the year it expects to have sold 5million Eee PCs since its launch.

Rival computer companies soonnoticed that one of their main hardware suppliers was now competingagainst them as the Eee brand took off. So Asustek spun off itscontract and original-design manufacturing business to quell concerns.At the same time, these competitors launched their own netbook productlines one by one. First was Acer with its Aspire One. Then came Lenovo, Toshiba (other-otc: TOSBF.PK - news - people ) and Dell (nasdaq: DELL - news - people ) with the IdeaPad S10, NB100 and Mini 9. Eventually Hewlett-Packard (nyse: HPQ - news - people ) announced its Mini 1000 netbook line.

Inthe latest quarter, how quickly PC companies reacted to the rise of theEee PC largely dictated their market performance. Computer giant hplost its top position in Europe, the Middle East and Africa, thanks toits slow entry into the netbook segment, according to technologyresearch firm Gartner. Acer, a crosstown rival in Taipei and firstresponder to Asustek's innovation, has since surpassed Asustek tobecome the number one company in the mini-laptop category. CitiInvestment Research estimates that notebook shipments will grow 15%globally next year, with almost all of that growth coming from low-end,$300 to $500 netbooks. Desktop shipments, it estimates, will decline21%.

Meanwhile, it's still too early to tell whether netbookshave created a new global product segment or cannibalized traditionalones, says Gartner analyst Mikako Kitagawa. Asustek is confident thatit's pioneered a new category, however, and says its market disruptionmakes that point very clear. For its innovation and disruption, theAsustek Eee PC is FORBES ASIA's Product of the Year.