Tiburon (CA) – Despite its recent accounting woes, Nvidia may have just completed one of the most successful quarters in the firm’s history. According to a report released by Jon Peddie Research (JPR) today, the company gained shares in virtually all of the markets it competes in – mainly at the expense of ATI, which suffered heavy losses across the board.
From a general perspective, the graphics chip market is in great shape. JPR reported that shipments jumped more than 5% sequentially, from 71.4 million in Q2 of this year to 76 million in Q3. Compared to Q3 of 2005, shipments were up a healthy 11.2%. But drill down into the numbers uncovered by JPR and you’ll find one more example of the cut throat competition in the graphics market and what may happen if you just don’t react quickly enough to market trends.
ATI, now reduced to the graphics division of CPU manufacturer AMD, was hit particularly hard in Q3. The company suffered market share losses in all major markets and lost the lead to Nvidia in several segments. On the desktop, ATI’s overall share dropped from about 26% in Q2 to 22% in Q3, while Nvidia jumped from 24% to 25% in the same time frame. Intel, due to its dominance in the chipset market, remained stable at about 35%. In the prestigious discrete (standalone) graphics chip market, which includes high-end desktop graphics devices, ATI dropped from 48% to 43%, while Nvidia climbed from a slight lead of 51% to a more commanding 57%, translating into a 14 point advantage over its rival.
ATI also had to give up market shares in mobile graphics, a segment it had undoubted control over during the past years. Market share dropped from 31% in Q2 to 24% in Q3; Nvidia gained eight percentage points and increased its presence from 11% to 19%. Intel fell from 55% to 51% between Q2 and Q3. The most significant change in market shares came in the mobile discrete segment: ATI held 75% of that market in Q1 of this year, dropped to 63.1% in Q2 and ended up at just 47% in Q3. Nvidia was on the receiving side and increased its share from 37% in Q2 to 53% in Q3 – which marks the first time that the company actually has the lead over ATI in this segment.
Interestingly, ATI’s losses come on the heels of the firm’s acquisition. There is no doubt that JPR’s report will raise eyebrows, cause concerns about AMD’s graphics strategy and speculations how competitive AMD’s graphics division will be down the road. While Jon Peddie told TG Daily that he had never seen such a landslide in market share shift between ATI and Nvidia before, he doubts that AMD will be giving up market shares it has won over the past years. Rather then interpreting the Q3 results as a trend, he considers the numbers as a “blip.” He agreed that what we may be seeing here is rather a combination of an ATI hiccup and rather unusual luck for Nvidia.
In discrete mobile graphics, which showed the most significant shift, Peddie said that Nvidia is currently capitalizing on a trend towards high-performing notebooks. “Despite what Intel may be saying, people are buying more desktop replacement notebooks. They leave them plugged in and they don’t care if they have to carry two or three additional pounds,” he said. Nvidia has been pushing high-end graphics for such notebooks for quite some time, while ATI aimed at the mid-range, at best. “Nvidia is at the right place at the right time. It is a wake-up call for ATI and they need to catch up.” However, Peddie cautioned to put too much interpretation in this particular example: “The discrete mobile market is only 23% of the mobile market, which is only 30% of the total graphics market. We are really talking here about a sub-segment of a segment,” he said.
In fact, ATI may already be planning an answer. Sources told TG Daily that AMD is working on a successor of the Turion 64 X2 CPU, which should be able to catch up to Intel’s Core 2 Duo processor within the foreseeable time, while providing a Centrino-like platform that could also be complemented through a higher-end graphics offering.
The dramatic markets hare shift could be seen as a first sign that AMD has changed the focus of ATI, away from enthusiast graphics. But Peddie thinks that such a change is unlikely. He said that AMD has “smuggled” ATI’s chipset group closer to AMD’s processor group and that the former ATI will no longer develop chipsets for Intel processors. But despite the fact that Nvidia’s GeForce 8800 GPU series is a “wonderful machine,” Peddie sees no change in what has become a tradition in the graphics chip industry: “We will see ATI jumping ahead of Nvidia’s chip performance with the release of the R600 GPU,” he said.
So, despite the market shift, if is business as usual, with a bit more spice in Q3. Things could get to “normal” soon, if Peddie is right: “I do not think that AMD will take that,” he said.