News

Microprocessor 4Q Decline Slowed by Atom, Report Says

• By Herb Torrens
• February 11, 2009

Worldwide shipments of PC microprocessors plummeted in the fourth quarter of 2008 (4Q08), according to a report announced on Wednesday by the International Data Group (IDC). Citing a "precipitous drop in end-system demand," IDC described the result as the worst decline in chip shipments since the company started tracking microprocessor data in 1996.

IDC found that PC processor shipments were down at -17 percent quarter-over-quarter and -11.4 percent year-over-year.

The slowdown sent an immediate chill through the entire PC supply chain, according to the report. However, the PC industry may have already prepared, based on its recent past, according to Shane Rau, director of semiconductors and personal computing research at IDC.

"If there's any silver lining, it's how the PC supply chain (OEMs, ODMs, distributors, semiconductor suppliers) has reacted to plummeting demand," stated Rau by e-mail. "In 2001, the PC supply chain was caught with lots of inventory that took months to burn off, even as demand continued to decline. That meant unstable pricing as vendors competed to get whatever demand was left. In this recession, oversupply is not much of an issue because the supply chain is being more responsive and disciplined."

Last month, the Gartner research firm released findings indicating that overall PC sales in 4Q08 were the worst since 2002. Gartner attributed the record decline to a weak professional market. The Gartner outlook also indicated a rise in sales in the emerging market for smaller computing devices such as Netbooks.

IDC's 4Q08 data support that observation, noting that the one bright spot in processor shipments was Intel's Atom, which is used primarily in "mini-notebook PCs." IDC's report indicated that without Atom, worldwide shipments of processors in 4Q08 would have been much worse: a whopping -27.7 percent quarter-over-quarter and -21.6 percent year-over-year.

"Processors like Atom will partially compensate on a unit basis for processors like [Intel's] Celeron-M and [AMD's] Sempron-M that would have sold in a better demand environment," Rau said. "Of course, Atom's effect on a revenue basis will be proportionally smaller due to its price."

Introduced to the market in 2008, Atom is Intel's smallest processor and uses the chipmaker's 45-nanometer (nm) manufacturing technology. That may change soon, according to a report issued by Intel on Tuesday.

This week, Intel's Paul Otellini, president and CEO, announced a $7 billion expenditure to construct "advanced manufacturing facilities" in the United States. The new facilities will produce smaller, faster and energy-conserving chips using 32-nm manufacturing technology.

"Intel's being aggressive about rolling out its 32-nm technology as both a competitive and market weapon," Rau said. "Competitively, Intel will be the first processor vendor to reach 32 nm, which will give it cost options and product integration options that, say, AMD won't have, since it's still transitioning to 45 nm.

"At the market level, the same cost and product integration options give Intel more ability to try to stimulate market demand," Rau added. "One might recall that Intel and AMD engaged in a price war during the last downturn in 2001. As a way to stimulate market demand, it failed. This time, Intel appears to be using 32-nm as a different attempt."

According to IDC data, Intel gained a 1.7-percent market share of mobile PC processors in the reported period, while No. 2 chipmaker AMD lost 1.2 percent. Intel also gained a modest share in the PC server/workstation market (2.5 percent), while AMD lost 2.5 percent, according to IDC's data.

With end-system demand down, IDC predicts shipments of microprocessors will decline further during the first two quarters of 2009.

"I see the effect of netbooks in 2009's processor market being to mitigate, but not completely cover, the unit losses in the value and midrange segments of the mobile PC space," Rau said. "No geographic region is immune from this downturn. The demand falloff is worldwide. After the downturn ends, we believe in 2H10, the Asia-Pacific region should resume its role as the leader in terms of PC demand."

The report, "Worldwide PC Processor 4Q08 Vendor Shares (Doc #216748)," is yet to be published but will be available here.