Tiburon (CA) – According to a report released by Jon Peddie Research (JPR), Nvidia in the fourth quarter of 2005 gained ground on ATI in terms of overall market share and continued to pull away in the standalone graphics chip market. X1000 manufacturing hurt ATI especially in the retail market, but a large-scale chipset deal with Intel helped the company to keep its existing market share.
Nvidia’s solid product line and availability of products enabled the company to achieve a clear market lead with about 52% of all standalone (discrete) graphics shipped during the quarter. Nearly half a year delay of ATI’s X1000 series resulted mostly in a decrease in retail sales, said Jon Peddie, principal analyst of JPR in a conversation with TG Daily. Still, ATI apparently got away with less damage than some would have expected: “The proof of little damage is that their unit sales in the discrete segment didn’t get that hurt and only high-end retail was impacted. However, that’s the most profitable and most visible segment,” Peddie said.
Nvidia, on the other end, was able to take advantage of ATI’s current problems and extended its lead in the discrete desktop market. “Nvidia came out with an excellent part, the G70, and it is still good, even against the R580,” Peddie said. And according to him, the company may be able to maintain its advantage for some time. “Nvidia will shrink the G70, up the clock and give the R580 a run for the money.” And even with the R580 (X1900) part out, ATI will have to pin its near-term business to figuring out what Nvidia will do: “ATI has to hope they enough head room in the R580 that they can meet Nvidia’s N71 challenge and in turn tweak (up) the R580’s clocks. I think they can, but the race will be close until both companies introduce new designs this fall,” Peddie said.
The market shares in the graphics market, however, are not just determined by discrete products, but foremost higher-volume integrated graphics chipsets. JPR estimates that Intel still leads the market with a share of 32%, down five points from the third quarter. ATI kept its market share at 24%, Nvidia climbed from 22 to 23%, Via/S3 even gained four points and ended up at a 15% share.
Q3 and Q4 especially were affected by Intel’s chipset restraints. The company is currently converting production facilities from 130 nm to 90 nm chipset production and ran into significant supply shortages for its lower end chipset products in the second half of last year. Intel found a temporary solution by contracting ATI to supply Xpress200 chipsets for Intel-branded boards. While this deal helped ATI to maintain its market share, Peddie believes that profits suffered. “It kept their unit share up, but the margins and average selling prices (ASP) on integrated graphics chipsets (IGC) are pretty low so their overall sales didn’t improve very much,” he said.
It is unclear, if ATI will be able to hold on to the deal, once Intel has its 90 nm fabs in production. But the fact that Intel is moving to newer version of the chipsets could put ATI in the position to convince Intel to continue to buy the chips for another few months. “It was always just a temporary business, and ATI knew that very well,” Peddie said. “It was a glory thing for ATI to sell parts to Intel, somewhat like Nvidia’s Dell deal for SLI, and it put ATI in the limelight as being a serious contender in the IGC market. They will not be able to stay at the same volume of unit shipments when Intel takes the space back. But Intel probably won’t take it back as it is an old product and Intel will try to motherboard makers to its new products, which have better ASPs and margins.