Notebook CPUs Led 2007 Chip Sales Growth

IDC finds mobile grew an astounding 34 percent while desktop chips rose a piddling 2 percent. What will this year bring?

The PC chip industry continued seeing strong sales and held prices relatively flat over 2007, according to a new report from market researcher IDC.

For the full year, total worldwide PC processor shipments grew 12.6 percent over 2006 while revenues were nearly flat, up only 1.7 to $30.55 billion.

This reflects the price erosion that occurred for most of the year, where vendors were lucky to keep average selling prices (ASPs) flat instead of declining as they did in other sectors, like memory.

During fourth quarter alone, microprocessor shipments grew 8.5 percent sequentially from third quarter. Revenue grew 9.6 percent sequentially to $8.7 billion, according to IDC.

By and large, the two major competitors in the field -- Intel and AMD -- held their respective market shares. For the entire year, Intel held 77.4 percent of the market to AMD's 22.2 percent, with the rest going to VIA Technology, IBM, Freescale and Transmeta.

This represents virtually no change from the 3Q07, but a slight decrease for AMD from the fourth quarter of 2006 -- before the company began suffering from a number of problems. In that quarter, AMD held 25.3 percent of the market to Intel's 74.5 percent.

What a difference a quarter can make. Barcelona delays and other production problems hurt AMD terribly, and its market share plummeted to 18.6 percent in the first quarter of 2007, just one quarter later.

Since then, AMD has clawed back to 23.1 percent market share in Q407.

Shane Rau, director of Semiconductors: Personal Computing research at IDC, told InternetNews.com that despite the woes surrounding AMD, it wasn't a yearlong bloodbath.

"There's some common wisdom to dispel that every quarter Intel is cleaning AMD's clock," he said. "It was the first quarter where AMD had its problem with supply chain and pricing. Since then it's been going toe to toe with Intel."

What AMD needs now is to get high end products out the door because that's where the profits lie.

"Until they get Barcelona and Phenom quad[-core] out in volume, that means they are not playing at the top of the stack where the best ASPs are," he said. "If you don't have products there, the rest of your products are still moving downward in price. If you don't have anything to replace them at the top end, your ASPs are sinking."

Compared to other markets, PC server chips had the best quarter, growing 17.0 percent sequentially while laptop chips grew 10.3 percent and desktop processors were up 6.5 percent.

In all three categories, IDC reported that sales in the middle and high end outpaced the low end. Rau attributed this primarily to Intel's Caneland platform, and a little to AMD's success in finally shipping Barcelona.

For the year, desktop processors grew by 2 percent, servers were up 5.6 percent, and mobile processors grew a whopping 34.3 percent.

IDC's PC researchers estimate that in 2010, laptop system sales will finally surpass desktop sales -- one year earlier than it had previously projected. Rau said he expects an even earlier transition for CPUs, with laptop chip sales surpassing desktop models in late 2009.

IDC expects mobile sales to remain strong in 2008, but a weakening of the U.S. economy may impact the rest of the market.

Both Intel and AMD noted in their recent quarterly announcements that they do about three-quarters of their business outside of the country, so impact of a U.S. slowdown might be mitigated.

Rau agrees, to a point.

"For an American-based company, having a lot of worldwide business does help them hedge their bets, especially as it goes along with a weak American dollar," he said. "That's an effective price cut for emerging markets that are very price-conscious. The danger is when the U.S. economy spills over into the worldwide economy."



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