May 17, 2012 — Barclays Capital’s C.J. Muse looks at the forecast for PC graphics processing units (GPU) based on a new report from Mercury Research. Shipments of PC graphic devices in Q1 2012 came in in-line to slightly below historical trends. Nvidia lost share to Intel and AMD due to tight 28nm chip supply. A structural shift in the fabless/foundry relationship is occurring, moving toward a take-or-pay environment, with which leading-edge fabless players will have to contend going forward, Muse says.
GPU shipments declined -1% Q/Q to 123 million units in 1Q12 (from 124.3 million units in 4Q11) compared to typical seasonality of 1.9% Q/Q growth seen over the last 5 years.
Mercury Research’s updated PC Graphics market share forecast for Q1 2012 (“PC Graphics Chip Sets & Technologies,” http://www.mercuryresearch.com/products.shtml) shows that discrete GPUs reversed trends this quarter — growing +3% Q/Q while integrated fell -2% Q/Q. This suggests that PC ODM/OEMs can increase spending on graphics now that hard disk drive (HDD) prices are decreasing with supply restored from the Thailand flooding disaster. Despite the strength in the discrete GPU market, limited availability of Nvidia’s Kepler GPU resulted in 90 bps of share loss in the discrete GPU market, with Intel and AMD taking modest share from Nvidia.
INTC gained 25bps of share in total GPU, AMD added 17bps, while NVDA lost 61bps.
INTC saw +140bps of share gain in the integrated GPU market but this was offset by the modest shift from integrated to discrete in 1Q12.
AMD lost 30bps of share to NVDA in the mobile discrete market but gained 150 bps in the desktop discrete market benefitting from the earlier ramp of 28nm graphics parts as well as from lower shipments by NVDA due to limited availably of its desktop parts. AMD gained 90bps in the discrete market. In the integrated market, AMD gained modest share in desktops but loss share to Intel on the notebook side resulting in AMD’s share in the integrated market slipping to 17.5% from 18% the prior quarter.
Reflecting the wind down of its chipset business (0.6% share in integrated graphics down from 1.7% share the prior quarter) coupled with share loss in the discrete market to ATI, NVDA saw its total GPU share fall to 15.1% in Q1 2012 from 15.7% in Q4 2011. Share dynamics were a bit different in desktop vs. notebook segments, where NVDA outpaced AMD (NVDA had a record Q for notebooks). NVDA’s share loss in desktops (shipments fell 4% Q/Q) came from limited availability of 28nm Kepler GPU parts. Kepler is manufactured using TSMC’s 28nm high performance (HP) process, the foundry’s most advanced 28nm process which uses their first-generation high-k metal gate (HKMG) technology and second-generation silicon germanium (SiGe) straining, Nvidia shares.
NVDA’s management reported that its FY Q1 results were dampened by 28nm chip shortages. NVDA suggests that this is not a yield issue, Muse says, adding that it is likely due to poor planning on NVDA’s part and reluctance on foundry TSMC’s part to add more capacity. In the future, look for Nvidia to regain that share as 28nm shortages lessen, Kepler sees higher attach rates, and Nvidia fulfills Apple orders. Robust design-in momentum on the Ivy Bridge platform, Ultrabooks, as well as Apple products all point to incremental share gains for NVDA going forward.
Overall attach rates were healthy — desktop attach rates were flattish at 33.7% but notebook attach rates increased to 32.8% from 29.7% in Q4 2011.
Barclays analysts expect that attach rates will go up initially on Intel’s Ivy Bridge platform, as seen in prior refresh cycles, but that over time, the market and especially the low-end market will favor integrated GPUs as improvements are made to the graphics performance on integrated chips (Intel’s Ivy Bridge increases graphics performance by 2x). The sector will see an uptick in attach rates over the next couple of quarters, with attach rates declining longer-term.
After two quarters of favoring the desktop market, the GPU market shifted back to notebooks. Notebook GPUs (up 4%, better than 5-year average of +0.5%) outperformed desktops (down 6%, vs a 5-year average of +2.9%), with what Muse sees as a “secular shift back to notebooks once again.” The mix of desktop GPUs declined to 44% in Q1 2012 (back to mid-2011 levels) from 47% in Q4 2011.