RealTime IT News

Graphics Chip Sales Rebound in Q2

The second quarter is usually the slowest time of the year for computing product sales, but this year is an exception in the graphics processing unit (GPU) market, as sales took off after Q1 doldrums.

A report issued this week by Jon Peddie Research, a market research firm specializing in graphics, showed that Q2 sales for graphics processors hit 98.30 million, a 31.3 percent improvement over Q1. Even better is that those numbers are an improvement over the 94.42 million units sold in Q2 2008, and the economy was in much better shape a year ago.

"We hit bottom and bounced off like a skipping stone," Jon Peddie, president of the company, told InternetNews.com. "I have never in all my years of doing this seen a Q1 to Q2 jump like this, ever. What that means is the channel and OEMs and ODMs have to be pretty confident of a strong Q3 and Q4 because they have been extremely cautious and tight with regard to inventory."

Sales collapsed in the fourth quarter of 2008, traditionally the best quarter of the year, when economic confidence went off a cliff. Consumers stopped buying, retailers stopped placing orders, and subsequently, foundries stopped making chips. It was like a multi-car pile-up on a foggy road.

Since then, the channel has emptied its inventory and has begun ordering more. Now we are approaching back-to-school and the October launch of Windows 7, which has hardware makers feeling confident again.

Things probably aren't going to get back to the normal seasonality till Q3 or Q4 this year, and we won't hit the levels of 2008 until 2010, Peddie predicts. However, he's optimistic that numbers will continue to improve because we are headed into the two best quarters of the calendar year.

Where the growth is

Much of the growth in 2009 went to AMD's (NYSE: AMD) ATI graphics unit. It posted an impressive growth rate, from 12.8 percent in Q1 to 18.4 percent in Q2. Intel (NASDAQ: INTC) also fared well, holding 50.3 percent of the market, a gain of 51.2 percent over Q1. nVidia (NASDAQ: NVDA) gained 29.2 percent, to 28.7 million units.

Peddie said ATI is really hitting on all cylinders, with excellent price, power and performance for its latest parts. "They got a part that's not too expensive, very powerful and using very little power. So they've really been giving nVidia a run for their money," he said.

"To nVidia's credit, they continue to surprise me with their ability to increase their sales. People are counting them out and denigrating them but they continue to pull a rabbit out of their hat. But this quarter, ATI out-sold them," he added.

Intel's success is summed up in one word: Atom. "Atom has lifted all ships. Intel sold a whole bunch of IGPs [integrated graphics processors] that got to take the ride with Atom," he said.

Something funny happened on the way to ATI's rout of nVidia. ATI had samples of new chips using a 40 nanometer design nine months ago, and nVidia still hasn't committed to 40nm. Most GPUs on the market today use 55nm.

But TSMC, the fabrication company that makes both ATI and nVidia chips, couldn't make sufficient quantities of the chips. In the end, it kept ATI's 40nm part off the market and now nVidia is catching up.

Suddenly, AMD's foundry spinoff company Globalfoundries looks a lot more appealing to both firms. "That's a big seller for Globalfoundries. They couldn't be happier," said Peddie.