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The evolution of the low-cost ultraportable market is kind of intriguing, because nobody really thought the market existed a few years ago. When Nicholas Negroponte and company decided to start work on the XO Laptop, the goal was to create a rugged, durable, and extraordinarily cheap laptop that could help bridge the digital divide between developed and developing nations. It wasn’t supposed to be sold commercially in developed countries. And Intel’s Classmate PC was designed for the same target market: educational use, primarily in developing countries.

But then along comes Asus, who decides to build a similar computer for a similar price, and target Europe, Asia, an the US. And you know what? The Eee PC sold like hotcakes, which has prompted everyone to rethink their strategy. Because not only are these underpowered computers cheaper for consumers, they’re significantly cheaper for manufacturers to build.

In fact, DigiTimes reports that Acer Computers chairman JT Wang says traditional notebooks have a 4 to 5% profit margin, while low-cost models have up to a 10% margin. What’s more, he says that 30% of the people who buy low cost laptops like the Eee PC are replacing a larger 14 or 15 inch notebook computer. That means 70% of buyers are not. And that means the low-cost ultraportable has opened up an entirely new market consisting of first time notebook purchasers and people who are buying a second portable computer.

Acer is expected to launch its own low-cost ultraportable this year.