Seasonality - Although it often seems to be lost, it still exists

Posted: 11.20.13

We’ve been tracking PC graphics, and PC shipments since the late 1980s. As a result, we have some fantastic historical data. One of the things we used to observe was the seasonality of shipments: shipments would drop in Q2, rise in Q3 and Q4, and wiggle or drop a little in Q1, but the overall trend was up. Then the world ended in 2008—actually, it also ended in 2000, so let’s take a look back then first. When the Internet bubble burst in 2000, the tidy seasonality curve started to wobble. Then, when the banks’ greedy derivatives bubble burst and the world really did end in 2008, all bets were off on how the PC or any other market would behave.

While the world was reeling from the economic shock, Steve Jobs introduced the iPad, and now the world was really knocked off its axis. If the comfortable and predictable seasonality of the PC market would ever come back, all hopes for it were trashed as tablets ate away the low end of the PC market.

We were now awash, trying to find our direction, and all indicators were down, down, down. Seasonality was dropped from our vocabulary, as was the word growth.

As PCs go, so goeth the graphics, and they have been on a more severe roller-coaster ride than the PC, dipping down (or back to) the levels of 2007, wiping out years of growth.

Seasonally in graphics shipments, once a comforting, predictable thing, became none-existent, it wasn’t even brought up in conversations anymore. The combination of embedded graphics in the CPU, tablets, and the economic doldrums took a toll on discrete graphics.

Discrete graphics (dGPUs) are now always used in a system that has an embedded GPU, you can’t buy a PC today that doesn’t have embedded graphics. Therefore, when you count GPUs as we do, you end up with more GPUs than PCs, and that’s called the attach rate.

The attach rate, as you might imagine, has been declining, from a high of 150% in Q1’11 to 137% this quarter. But remarkably, it’s been rather consistent, running at an average of 135% since 2004. And lo and behold, when you look at the attach rate, seasonality pops out. Really? Yes, really.

Look at how the attach rate drops every fourth quarter in the charts and more interestingly, rises in Q3.

So even though we are living in chaotic times, and all our crystal balls are foggy, there is still some predictability. The logic of the decline of the attach rate in Q4 is easy. Our data is supply-side data and shows (predicts) what will happen in the following quarter in retail. Consumers and enterprise don’t buy much in Q1, and they don’t buy aspirational items like high-performance graphics boards, or notebooks with powerful dGPUs in them. That stuff is bought in the holiday season (typically), and the holiday season is stocked up in Q3. If you take a look at the graphics in the Market Watch summary in this week’s issue of TechWatch (page 21), you see the PC market went up in Q3 this year. And you can pretty much count on it being flat in Q4. It’s that seasonality thing, you know.