The $599 Neo, announced last week, comes in at about half the price of the MacBook Air, Apple’s previously least expensive laptop, and is cheaper than the standard iPhone 17 released last year, which retails for $799.

Apple’s shift from the upper echelon of the laptop market into the more affordable range has it competing with a whole new group of lower-cost PCs, and competitors have taken notice, said Nick Wu, the chief financial officer of PC maker Asus.

“Given Apple’s historically very premium pricing, launching such an affordable product is certainly a shock to the entire market,” said Wu, according to an English translation of Asus’ most recent earnings call published by Seeking Alpha. 

Apple did not immediately respond to Fortune’s request for comment.

Still, Wu noted Apple’s MacBook Neo was, in his opinion, mainly made for “content consumption,” with limitations like having no upgradeable storage and only 8 gigabytes of unified memory, which may limit some applications.

“In that case, the Neo feels more like a tablet,” he added.

Indeed, the MacBook Neo’s base model lacks the full power of Apple’s other laptops such as the MacBook Air M5. It has 8 gigabytes of unified memory and no backlit keyboard and only 256 gigabytes of storage—the same amount of storage as is standard on an iPhone 17. Meanwhile, the MacBook Air M5 comes standard with a higher 16 gigabytes of unified memory and 512 gigabytes of storage space.

To be sure, the upgraded version of the Neo, which costs $699, has double the storage of the base model at 512 gigabytes, despite also having the same 8 gigabytes of memory.

“It’s not that it cannot do all the work, but considering user experience and those hardware limitations, the experience, I think, differs significantly from mainstream products,” Wu said about the Neo’s functionality.

Some reviewers have noted the Neo could be a good fit for students (Apple offers a student discount) and casual laptop users who use it to stream video or create documents, but that it may fall short for professionals looking to code or edit photos and video. Still, other reviewers were able to use Apple’s Final Cut Pro video editing software as well as the photo editing software Adobe Lightroom without issue.

Facing the threat

Even if the MacBook Neo may have some limitations, the PC industry is still treating it as a potential threat, Wu noted. 

“I believe all PC vendors, including upstream vendors like Microsoft, [hotlink]Intel,[/hotlink] and AMD, they’re all taking this very seriously, seriously discussing how to compete with this product in the entire PC ecosystem,” he said.

Apple’s release of the MacBook Neo is the latest step in its years-long strategy to capture price-sensitive consumers without abandoning its premium brand. Among its moves in this category, is the company’s launch of the 2016 iPhone SE as an entry point for budget iPhone buyers as well as a $329 iPad it launched in 2017. Earlier this month, the company unveiled the iPhone 17e, a lower-cost iPhone that starts at $599, the same price as the MacBook Neo.

Now, the company is expanding this strategy for the PC market, and Wu said the industry will move quickly to follow the tech giant’s lead.

“Of course, the entire PC system will launch corresponding products to compete with Apple,” Wu said. “The final market competition outcome is hard to predict.”