IDC: Chip Sector Rebound Not What it Seems

Second quarter 2009 worldwide PC microprocessor shipments rose 10.1 percent over the first quarter, according to a just-released IDC report, yet another sign of recovery for the battered chip sector, although it’s still got a ways to go.

The 10.1 percent recovery is certainly better than the 10.9 percent fall from Q4 2008 to Q1 09, but it doesn’t tell the whole story. Unit shipments declined 7.0 percent from the second quarter of 2008 and revenue declined 15.3 percent year over year, indicating continued pressure on average selling prices (ASPs).

Much of what has been going on in the last two quarters has been rebalancing of inventories between manufacturers, suppliers and system builders. Sales stopped dead in the fourth quarter, forcing companies to stop manufacturing product. Throughout Q1, inventory was slowly drained from the channel and Q2 was marked by restocking of depleted inventory.

The biggest mover of the quarter was shipments of Atom processors, which increased 34 percent from Q1 to Q2 of 2009. IDC estimates that the Atom processor sales represented 25 percent of Intel’s (NASDAQ: INTC) mobile PC processor shipments in Q2 09 and 8.1 percent of Intel’s mobile PC processor revenues for the same quarter.

Shane Rau, director of semiconductors for personal computing research at IDC says that the flatness of AMD (NYSE: AMD) sales and that Intel’s revenue from Asia/Pacific, where the vast majority of PCs are built, grew from 51 percent in Q1 09 to 55 percent in Q2 09 indicates a broad-based recovery has not yet begun.

“We feel that the supply chain replenishment of inventories in late Q1 and early Q2 is what drove a lot of sales,” he told InternetNews.com. “Any idea that there was a recovery in the economy this quarter is belied by the fact that the growth came from Intel. Now, Intel can certainly drive a market, but the isolation to Intel, Atom, and in Asia seems pretty focused.”

Intel bounces back

In Q1, AMD made some big gains on Intel, but this past quarter showed an Intel recovery. Its overall PC shipments grew 12.5 percent from Q1 to Q2 while AMD was up just 1.8 percent. More important, Intel’s overall worldwide marketshare went from 77.3 percent in Q1 to 78.9 percent, while AMD slipped from 22.3 percent to 20.6 percent.

Next page: A steady stream of new products from AMD

Page 2 of 2

This despite a steady stream of new products from AMD. “They aren’t setting the market on fire yet,” said Rau. “They are mostly focused on righting their business and getting new products out into market and are looking toward the second half before they reach any significant volumes.”

Intel was strongest in servers. It has been steadily gnawing away at AMD’s portion of the server business, and now owns 89.9 percent of the business compared to 10.1 percent for AMD. A year ago, it was 86.2 percent to 13.8 percent.

This reflects leftover ill-effects from the Barcelona delay debacle. “They hurt themselves with their OEM relationships with Barcelona. With Shanghai and Istanbul they are still turning that boat around and probably will bottom out at the 10 percent mark in my figures and probably go up from here,” he said.

On the desktop, Intel is losing ground to AMD. It held 70.2 percent of the desktop space to AMD’s 29.4 percent. In Q2 2008, Intel had 73.3 percent and AMD had 26.4 percent. In mobile, the two held virtually even to 2008 figures. Intel had 86.9 percent, a slight bump from Q2 08’s 86.5 percent, and AMD was even with 12.6 percent of the market.

VIA Technologies, which had made a wave with its C7 processor in the netbook space, is quickly losing steam. It peaked in Q3 2008 at 1.2 percent. Now it has just 0.5 percent.

Riding along the bottom

For now, Rau said a recovery is a ways off. IDC doesn’t see PC chip sales surpassing 2008 levels until at least 2012.

“We’re riding along the bottom and the variations you see are driven by typical seasonal patterns. If you look at 2009 in isolation, yes, the second half will be better than the first half, but compared to 2008 and 2007, we’re at lower levels. We have to get through the first half of 2010 before we see recovery,” he said.

Windows 7’s release in late October could be a positive, but only a light bump in sales, he predicts.

“Their release schedule is a little tight for holiday buying. I think it will be a modest help but it’s not a panacea. There might be some pent-up demand, but consumers have to be able to buy the PC. They have to have the disposable income,” said Rau.

News Around the Web