Intel Trumps Graphics Rivals in Market Share

Already the undisputed king of CPUs, Intel has now
landed atop the heap as total graphics leader.

New numbers published this week report the Santa Clara, Calif.-based chip-making giant secured 37.7 percent market share for the second quarter
compared to 33.0 percent for the first. The report came from multimedia
consulting firm Jon Peddie Research The quarterly survey included graphics
shipments and supplier market share for the second calendar quarter of 2004; it included both discreet and integrated graphics chips for desktop
and mobile computers. Intel only makes integrated graphics chips
and has not announced plans to do otherwise.

NVidia ranked second, with 23.2 percent market
share, down 4 percent from the beginning of the year. Following closely, ATI Technologies dropped from 24.0 percent in
Q1 to 23.2 percent in Q2. NVIDIA regularly jousts with ATI for leadership
in the graphics processor marketplace, where processors can
fetch close to $500 apiece. In addition to their usual battles for the desktop
and notebook platforms, workstations, set-top boxes and digital televisions,
the rivals also compete in the gaming console marketplace.

Out of a field of eight manufacturers, VIA Technologies was the only
other gainer besides Intel. The company inched upward from 7.8 percent
market share in Q1 to its recent share of 8.9 percent.

Peddie’s Market Watch tracker found approximately 54.3 million PC
graphics devices shipped in Q2 of this year, representing a 5.2 percent
decline from the previous quarter and a 12.8 percent increase over the same
period the previous year. The desktop graphics segment saw a 6.6 percent
decline in quarterly shipments but achieved 10.6 percent growth
year-over-year. Within the desktop segment, discrete controller shipments
declined 19.2 percent sequentially, while integrated graphics shipments
increased 5.5 percent on a quarterly basis.

Report author and tech market consultant Jon Peddie told
internetnews.com that Intel found success primarily because of the
industry-wide transition from AGP-based systems to PCI Express
interconnects and, ironically, from production
delays in its Grantsdale chipset.

“The Grantsdale chipset and PCI Express are remarkably good, and until a
new class of quality of games come out that exploit the chips that ATI and
NVidia manufacture, things won’t change anytime soon,” Peddie said.

And while NVidia is still the leading rival ATI in the “discreet”
category, the Santa Clara-based graphics chipmaker reported lower than
expected Q2 Earnings. The company chalked up the slide to pricing pressure,
market share losses and product delays at Intel.

“NVidia was hoping that there would be more Grantsdale chipsets. Both ATI
and Intel have cut prices, and nVidia had to react. The problem that
the industry faces stems from the transition
from AGP-based to PCI Express,” Peddie told internetnews.com. “As
this snake sheds its skin, the difficulty is that nobody knows how it’s
going to react. Intel got criticized last week because their inventories
were so high. That is making life miserable for all of the players.”

Erach Desai, semiconductor analyst with American Technology Research,
mirrored Peddie’s concerns.

“Uncertainty will linger until Grantsdale-based PCs ship in material
volume, and we get a good picture of attach rates for discrete GPUs. That
will not play out until Q1 2005 at the earliest,” he said.

Desai said his firm is looking forward to ATI’s next earnings statement.
“Should its core graphics revenue also disappoint, the focus will shift to
Intel’s September quarter, and whether this is an IGP vs. discrete GPU
issue.”

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