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RealTime IT News

Graphics Card Volumes Up, Dollar Sales Down

The bulk of PCs sold today come with integrated graphics, but it seems integrated graphics doesn't quite cut the mustard for many users, as the add-in board market continues to grow, at least numerically.

For the third calendar quarter of 2006, revenue from add-in graphics boards declined by 12.2 percent over Q3 2005 to $4.97 billion, according to a report from Jon Peddie Research, which specializes in following the graphics market. Overall, he expects the add-in board market to top $21 billion in 2006.

The dollar decline comes even as unit sales rose to 21.8 million boards shipped, a 10.6 percent increase from Q2 2006 and 7.7 percent over Q3 2005. The irony of it all is that prices are going up at the high end, according to Peddie.

This indicates that there is more midrange and low-end product being sold, which is dragging down the average selling price. "More people are buying stuff but they are coming in to the market at the lower end because prices are so attractive. So you have a pretty steady high-end segment but with much more growth at the low end," he told internetnews.com.

ATI and nVidia keep fast, tight upgrade schedules. Both companies release a new video chip with a big performance leap over prior generations every year, and a refresh with a slight performance bump around six months after the big leap chip.

This constant stream of new product means a stuffed channel and several generations of hardware on shelves. However, the performance race between ATI and nVidia has been nothing short of frenzied, leaving the Intel/AMD performance battle look downright tame.

A two-year old CPU is considered dated, but a two-year-old video card is still a pretty good performer, and at this point, cheap. ATI's X850 is a "damn fine board," as Peddie put it, for $125, and it is three years old.

Enthusiasts, gamers who must have the latest/fastest/greatest, only make up around four percent of the market, around three to five million users by Peddie's estimation. But they are also the noisiest and the graphics vendors, AMD's  ATI division and nVidia  cater to that segment.

That reflects a difference in the design and marketing plans of video makers vs. CPU developers. "They [Intel and AMD] don't design for the high end. They design for the performance end and volume market. nVidia and ATI always design for the high end and then do a waterfall. Last year's high end is this year's midrange," said Peddie.

But, he said, fatigue might finally be setting in as these hotrod video cards prove to be good enough. "People are not waiting for the next product. The market is tired," he said.

Peddie thinks that the oversupply in the channel will continue through Q4, and he expects there will be some disappointments in the Q4 numbers in terms of dollar sales, if not units, as products are discounted to move them off shelves.

Q1 of 2007 will be the quarter where video card sales could spike thanks to Vista, which will require a performance video card to get the most out of its 3-D "Aero" interface. "That's when the battle will begin between integrated graphics and add in boards," said Peddie.