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RealTime IT News

A Bigger Slump For Graphics Vendors

Microsoft may be crowing about great sales from Vista, but vendors in the graphics sector of the computer industry are singing the blues. A report from Jon Peddie Research showed that sales were down even more than usual in the first quarter of 2007, with softness in laptop sales.

Overall, the market was down 5.5 percent from Q4 of 2006, which is typical. A total of 78.8 million graphics parts, discrete and integrated, were sold in Q1. After the big Christmas rush, things always slowed down.

"Semiconductors of every type were down, and they are a leading indicator of the next quarter," Peddie told internetnews.com. "So the graphics chips shipped in Q1 are in computers sold in Q2 or later. So if we see a decline in graphics in Q1 then we can confidently predict a decline in PC shipments in Q2, which they would do anyway due to seasonality, but this might be worse."

Peddie admits he's not sure why sales tanked, especially with Microsoft trumpeting a 65 percent jump in profits and saying Vista was the reason. "I think the corporate side of the market is on hold as they figure out whether or not Vista is a good thing or a bad thing," he said.

"We're reading a lot of 'No Vista' stories and a lot of criticisms of Vista by various reviewers, so the feeling is Vista is not as popular as anyone thought it was going to be. That is in just total conflict with the results Microsoft is reporting and I'm at a loss to explain it," he added.

Laptop chipsets were up 24.6 percent year-to-year but slipped 7.2 percent from Q4 '06. In the last two years, laptop sales from Q4 to Q1 (2005-06, 2004-05) were flat, while 2003-04 was slightly down, said Peddie.

The most notable event in Q1 was that nVidia  surpassed Intel  in desktop sales. Desktop graphics segment saw shipments decline by 4.8 percent quarter to quarter to 54.8 million units, and it declined 1.4 percent year-to-year.

Peddie estimates that 23.9 million mobile graphics devices shipped in Q1'07. Of that amount, 18.74 million, or 78 percent, were integrated chipsets (IGPs) for notebooks. Intel led the mobile graphics market with a 55 percent share, up from 50 percent. AMD  lost 0.2 percent to a 23.2 percent share and nVidia slipped to 20 percent from 22.9 percent.

Of the 17 million desktop chips nVidia sold in Q1, 12 million were discrete parts, meaning they were used in add-in cards. But five million were integrated, and nVidia's only OEM for integrated chipsets is the AMD market.

nVidia and Intel have never been able to strike a deal, since nVidia's nForce chipset with integrated graphics competes directly with Intel's chipsets. The idea AMD uses nVidia chips after it spent $5.4 billion to acquire ATI is as confusing as it is amusing.

Peddie predicts the second quarter will be down as OEMs prepare for the third quarter, when back to school buying begins. He's expecting a good third quarter, if the economy stays strong. "There could be a lot of pent-up demand and it will show up in Q3," he said.

AMD is about to release its next major graphics processor, the R600. Peddie said it's an excellent part, but it's coming out at the worst time of year. "They'll have a good Q2 but it will still be the second quarter," he said.



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