Intel PCIntel has teamed up with Asustek Computer, the Taiwanese circuitboard maker, to mass market a $199 notebook computer.

This competes squarely with the “XO” made by OLPC (One Laptop Per Child Foundation), which runs on Linux and uses an AMD processor. You can read more about the XO here.

Though it is a potentially huge market, margins must be razor thin. Hence, the predominant question would be why Intel is interested in getting into the fray in the first place.

Roger Kay, president of Endpoint Technologies offers the clue:

“Initially, they will make very low margins, but manufacturing costs are going down all the time, while many of the countries are getting wealthier, and so the manufacturers are looking to build their brand loyalty now in preparation.”

Intel plans to start shipping the computer next month and aims to sell 200,000 by the end of the year.

What kind of impact do you reckon this will have on the laptop market? Do you think corporates will start to grab these super-cheap devices and use them in the place of low-end terminals? Join the discussion.