Nanotech - The Circuits Blog

A new report says the longstanding integrated graphics chip market will disappear--a market that Intel currently dominates.

In a report entitled "Integrated graphics chip market to disappear by 2012," Tiburon, Calif.-based Jon Peddie Research forecasts the end of the market for "the popular integrated graphics processor chipset...after 15 years of stellar growth."

Many low-end and mainstream consumer and business laptops sold over the last five years use Intel graphics built into the chipset, a low-performance but cheaper alternative to discrete graphics chips from Nvidia and ATI. That's made Intel, ironically enough, the market leader in graphics chip market share despite the performance deficit. In 2008, Intel's market share, by quarter, was typically over 50 percent, while Advanced Micro Devices (ATI's parent company) and Nvidia bounced around in the 20 to 30 percent range.

Overall, in 2008, 67 percent of the graphics chips shipped were integrated. In 2011 this will drop to 20 percent, and by 2013 it will be less than 1 percent, according to Jon Peddie.

Intel is moving graphics into the same package as the processor.

(Credit: Intel)

So what will take its place? "Embedded" graphics built into the same chip package--and later onto the same piece of silicon--as the main processor, according to the report. In the fourth quarter of this year, Intel will bring out a 32-nanometer mobile processor code-named Arrandale that integrates graphics silicon into the same chip package as the main processor, or CPU. Advanced Micro Devices has plans to "fuse" the CPU (central processing unit) and GPU (graphics processing unit), probably sometime in 2011.

All of this has already happened in the smartphone market. Processors from Qualcomm, Texas Instruments, and Nvidia put graphics on the same piece of silicon as main processor.

And what about Nvidia and ATI and their high-octane graphics chips? "This will not, as many believe, impact the discrete graphics and add-in board market. In fact, with hybrid configuration, embedded graphics will enhance the discrete GPU sales," the report said.

Between 2010 and 2012 there will be three choices for graphics, according to Jon Peddie: traditional discrete GPUs mounted on add-in boards and/or the motherboard, integrated graphics processor chipsets, and processors with embedded graphics. One or more of these devices will be employed in PCs.

A short history lesson, courtesy of Jon Peddie: the first integrated graphics controller was Sun Microsystems' Legos, which came out in 1989 for the company's SPARC processor. The first integrated graphics controller for the PC was introduced by Silicon Integrated Systems for Intel processors in 1997.

Jon Peddie Research said Thursday that estimated graphics chip shipments in the fourth quarter plummeted 34 percent from the third quarter--a very atypical month-to-month decline.

AMD, Intel, Nvidia 2008 laptop graphics chip market share by quarter

(Credit: Jon Peddie Research)

"The fourth quarter is usually a positive quarter for the computer industry. There has obviously been some inventory problems in the quarter," said Jon Peddie, president of Tiburon Calif.-based research firm, in a statement.

And it will get worse. "We're...bracing for what will probably be the worst Q1 and Q2 decline we've seen since the Internet bubble pop of 2000," he warned.

Total shipments of GPUs for the fourth quarter of 2008 were 72.35 million, down 28.5 percent from 100.5 million GPUs shipped in the same quarter last year. And in the third quarter of 2008, 111.26 million units shipped, representing a 34 percent sequential quarter-to-quarter drop. (GPU stands for graphics processing unit.)

"Vendors were bracing for a slower than usual quarter due to economic factors, but performance this quarter was surprisingly low," Peddie said. He attributed it to the usual suspects: the worldwide financial market decline and sapped consumer spending.

In the desktop segment, Nvidia has held a slight edge with a market share of 37.9 percent, gaining on Intel, Peddie said. AMD also gained market share on the desktop, going from 20.3 percent in the third quarter to 21.4 percent in the fourth quarter. "Given the tough circumstances of this quarter, AMD's increase is no mean accomplishment," Peddie said.

Advanced Micro Devices' new graphics chips are taking market share from Nvidia, a report issued Wednesday confirmed.

"AMD has by all accounts exceeded expectations with its Radeon HD 4000 series," according to report issued by market researcher Jon Peddie Research (JPR).

Aggressive pricing by AMD's ATI graphics unit made the difference, bringing down prices on add-in graphics boards. "Priced aggressively yet delivering solid performance, AMD's new line not only took back some market share--jumping up to 40 percent from 35 percent the quarter prior--it forced Nvidia (and partners) to cut prices on its recently released GTX 200 series product," JPR said.

Prices for graphics boards based on Nvidia GTX 260 and 280 graphics chips were slashed back in July. This happened only a few weeks after Nvidia launched the chips.

"Discounts cut into ASPs (average selling prices), taking a toll on revenue for both Nvidia and the market overall, the latter down 27 percent (year-over-year) to $3.8 billion," JPR said.

Graphics add-in board unit shipments were up sequentially but down year-to-year

(Credit: Jon Peddie Research)

The sequential growth for add-in boards tracked the growth in the aggregate market for graphics chips (which also includes motherboard-integrated products). The latter saw an increase (sequentially) in unit shipments of 17.8 percent in the third quarter. Unit shipments for add-in boards increased 11 percent to 21.9 million sequentially but fell 15 percent year-to-year.

The economy may be under water, but the graphics chip market is on fire.

The market for graphics processing units (GPUs) saw the biggest increase in third-quarter shipments in six years, according to Jon Peddie Research (JPR), as AMD gained in both the desktop and laptop segments.

Laptop graphics chip shipments soared by almost 40 percent quarter-to-quarter, as AMD gained

(Credit: Jon Peddie Research)

In the third quarter of 2008, more than 111 million GPUs were shipped, the market researcher said. During the same quarter last year, 91 million GPUs shipped, and 94 million units shipped in the previous quarter. That's an annual increase of 22.5 percent and a quarter-to-quarter increase of almost 18 percent, according to JPR.

In the overall market, Intel jumped from 33.4 percent in the third quarter of 2007 to 49.4 percent in the third quarter of this year, according to JPR. AMD saw year-to-year growth of 22.8 percent, while Nvidia lost 6.4 percent year-to-year.

For desktop GPUs, Intel increased its first place position to a 43.9 percent share, while Nvidia's position slipped to 32.6 percent, and AMD climbed to 20.3 percent, JPR said. Desktop GPUs saw an increase of 4.7 percent this quarter to 61.9 million units.

On the laptop front, Intel GPU shipments dropped one point to 56.2 percent, while Nvidia GPU shipments declined to 21.8 percent, and AMD jumped to 20.9 percent. Laptop graphics chips soared almost by 40 percent quarter-to-quarter to 49.4 million units, to claim 44.4 percent of the market, JPR reported.

Though the third quarter is typically up as PC makers place orders for chips for the holiday season, "this quarter was up more than any other for some time, and in spite of suggestions of a recession that started last Q4," said Jon Peddie, president of the Tiburon, Calif.-based firm.

Peddie cautions, however, that the doom-and-gloom scenarios may be having their effect on business and consumer spending plans and the fourth quarter could be flat (compared with the third quarter) this year.

Intel officially still rules the graphics chip market. But an arcane-sounding statistic called "double-attach" may redefine the chipmaker's standing.

First, the official first-quarter graphics chip market share numbers. Total shipments for Q1 were 95 million units, down 5.6 percent from the fourth quarter of 2007 and up 20 percent over the same period in the previous year, according to Jon Peddie Research.

"Traditionally, the first quarter has flat to negative growth for the computer industry as retailers and OEMs sell what's left from the holiday season. The quarter saw the biggest drop since 2005," said Peddie.

Total graphics chip market shares for the first quarter of 2008.

(Credit: Jon Peddie Research)

In the overall graphics market (desktops and notebooks), Intel held its first place position, claiming 42.7 percent, up from about 38.7 percent in the same period of the previous year, the market researcher said.

Nvidia's share stood at 32.7 percent, up from 28.5 percent in the year-earlier period. Advanced Micro Devices was at 18.6 percent, down from a 22 percent share last year.

On the desktop, Intel took back its first place position (year-to-year) with a 38 percent share against Nvidia's 36 percent, while AMD moved up to 19 percent, Peddie said.

In the notebook market, Intel held its dominant position but slipped one point to 53 percent while Nvidia gained a point to 27 percent and AMD slid a point to 17 percent.

Intel dominates market share figures because virtually all Intel-based PCs (shipping over the last few years) have an Intel Integrated Graphics Processor (IGP) built in. And PC suppliers opt to use this low-end Intel IGP configuration in a number of models--particularly in the notebook market--because it's an extremely inexpensive way to provide graphics. Intel graphics chips are used in specialized markets like ultra-portables, too. The Apple MacBook Air and ThinkPad X300, for example, ship only with Intel X3100 integrated graphics.

But this isn't the whole story. In a post Nvidia-CEO-rant world, there is a push to recognize a pesky statistic called "double-attach." This means that a PC shipped with an integrated Intel graphics chip will be double attached when a separate graphics card is attached on top of the existing Intel graphics silicon. The Intel chip is disabled and goes "unused."

"The overall 'double attach' is about 35 percent," said Jon Peddie. That puts a sizable dent in Intel's market share. A recent report from Doug Freedman of American Technology Research went so far to say this: "Nvidia remains the No.1 graphics supplier as up to 73 mil Integrated (Intel) IGPs are unused in systems due to 'double-attach' with a Nvidia solution."