RealTime IT News

Graphics Market Rebounds 21 Percent in Q3

The graphics chip market has rebounded to surpass where it was at its peak in 2008 before the market collapsed exactly one year ago this month, thanks to a 21.2 percent sequential growth in the third quarter, according to a report from Jon Peddie Research (JPR).

The rebound was not driven by any major product releases, mostly it was part of OEMs revving up their products for both Christmas and the release of Windows 7. Just like CPU sales went straight into finished products and not inventory, discrete and integrated graphics chips also went into final products.

"The big news is the recession is over and we're back on an even keel and sales are back up to where they were before the whole thing collapsed last year," Jon Peddie, president of JPR, told InternetNews.com.

A total of 119.45 million units shipped in the third quarter, surpassing the 111 million that shipped in Q3 of 2008. AMD (NYSE: AMD) showed the biggest jump, growing 30 percent from Q2 to Q3, followed by Intel (NASDAQ: INTC) with 21 percent sequential growth. nVidia (NASDAQ: NVDA), the 800 pound gorilla in this space, shrank four percent sequentially.

nVidia has had a few problems. First, it's been the leader for a long time. From there, you've got nowhere to go but down, Peddie noted. And it has been a while since nVidia shipped a new product. Its previous generation came out in June 2008, as did AMD.

AMD has since come out with a new card that has been well-received and well-reviewed on tech sites. nVidia has been a little slower to release new products, but its new "Fermi" card promises to make up for lost time, said Peddie.

"Fermi is a miraculous part. I really am impressed with what it's going to be capable of as a supercomputer co-processor," he said. Fermi probably has more silicon than it needs, so nVidia will have to whittle the three billion transistor chip down a bit for its video cards.

At that rate, new cards from nVidia OEMs won't appear until Q1, which means the company misses out on Christmas. No reason to worry, said Peddie. "It's one year out of 16 and everyone strikes out once in a while," he said.

Notebook sales and a return to growth

The notebook market accounted for nearly half of all graphics chips sales, 56 million out of the 119 million graphics processors shipped. In some cases, they double-dip by including both integrated and discrete graphics in the same laptop. Discrete graphics processors in notebooks jumped more than 36 percent over Q2 while integrated graphics were up 27 percent.

By and large, Peddie said there is nothing unusual here, just a return to growth. "GPUs are a good leading indicator of what PC sales will be, so this tells us OEMs are betting big on consumer appetite in the holiday season and they and their partners are putting in the inventory to meet the demand," he said.

The down side is because there has been this large build up of inventory, Q4 shipments are probably not going to be dramatically larger than Q3. Fourth quarter product builds aren't going to be in stores in time for Christmas, they will be Q1 2010 releases when sales fall off.

As such, fourth quarter sales are estimated to be up about five percent. While that pales in comparison to Q3, it is still headed in the right direction, Peddie noted.