RealTime IT News

IDC: Chip Sales Grow, Prices Go Low


Even in the face of a traditionally soft quarter and an economic downturn in the United States, semiconductor sales rose to record levels in the second quarter (Q2) of 2008 according to figures from IDC.

Worldwide, unit shipments for the quarter ended June 30, 2008, grew 3.1 percent over the prior quarter and 16.1 percent over the same period last year. Both stats are remarkable, as the second quarter is traditionally considered the weakest time of the year, so to rise versus the first quarter is an accomplishment. To have a double-digit increase despite the sputtering U.S. economy is also notable.

IDC semiconductors analyst Shane Rau attributes the rise to Intel not sitting on its laurels. "Intel had record shipments in Q2," he told InternetNews.com. "Their shipments actually went up,” Rau said. “They are driving their new platforms heavily and want to keep their momentum going by introducing new products at new prices."

To get those sales, however, means massive price cuts. Revenue from x86 processors decreased 4.5 percent in the space of one quarter, from $8.0 billion in Q1 to $7.7 billion for the second quarter, echoing what Gartner (NYSE: IT) also said, that to maintain sales, vendors are cutting prices significantly to make the sale.

"Intel is being aggressive, but there is the economic situation as well, which means a weak dollar in emerging markets is helping drive volume, and that means a price cut for many emerging markets," Rau said.

Something else notable about the figures for Q2 is that despite releasing a whole host of new Phenom and Quad Core Opteron processors, AMD (NYSE: AMD) has only managed to stem the bleeding but is still losing market share. On an overall unit basis, Intel (NASDAQ: INTC) held 79.7 percent of the market, a gain of 0.9 percent from the first quarter of this year, while AMD held 19.7 percent, a loss of 1.2 percent.

When compared with the second quarter of 2007, the changes are far more pronounced. Intel held 76.6 percent of the market to AMD's 23.1 percent. In the space of one year, Intel has risen 3 percentage points, while AMD has lost that much.

The change comes almost entirely on the basis of the mobility market, as the two are virtually unchanged in the desktop and server spaces. In mobility, Intel went from 82.7 percent of the market in Q2 of 2007 to 86.5 percent in Q2 of 2008, while AMD, which never had an official mobile platform until recently with the Puma, dropped from 17.0 percent to 12.6 percent.

Via Technologies, which hasn't had much presence in the x86 business in recent years, is another gainer in the space. It's performing well with its C7-M processor to gain 0.9 percent market share, a tripling of the 0.3 percent it held last year. "VIA is becoming the alternative to Intel in the very low end. Everyone usually thinks of AMD as the alternative to Intel but VIA is the one getting traction," said Rau.

The desktop positions were largely unchanged. Intel held 73.3 percent of market in 2008, a slight bump from 2007's 72.1 percent. AMD was at 26.4 percent, slightly down from 2007's 27.6 percent.

IDC predicts the PC processor market revenue will grow 7.5 percent in 2008 to over $32.8 billion. Rau estimates that the new AMD parts will begin to make their presence known in the third quarter.

"The third quarter will be more telling. The second quarter is when they roll out new products. The ramp-up comes in Q3 as PC OEMs build for the back-to-school buying season and holiday season," he said.