The PC graphics industry is resilient: chip shipments decline but new product introductions increase

Jon Peddie Research publishes Q2'02 Market Watch: graphic chip report for the second calendar quarter of 2002

Robert Dow

TIBURON, CA—October 10, 2002 —Leading research firm
for multimedia and graphics, Jon Peddie Research, today announced
the results of their Quarterly Report on the Graphics semiconductor
market. The study has found the graphics industry to be relatively
hardy in comparison to the computer industry as a whole.

The second quarter of the year is traditionally a slow
period in the graphics industry. Although shipments of graphics
devices declined only slightly in Q2’02 compared to the previous
quarter, the period was disappointing to many companies in
terms of revenues, profits, gross margin, and share price performance. The
outlook for Q3’02 continues to be mixed as several suppliers, including
ATI, point to ongoing softness in the PC market as an inhibitor to
increased shipments of graphics in both the desktop and mobile segments.

Despite the current climate, seven major graphics suppliers will be
ramping new desktop GPU products in 2H’02, an unusual event in the
relatively consolidated graphics industry. ATI and Nvidia will lead the
pack with DirectX 9 compliant parts. SiS is making a play for the
mainstream with its AGP 8X Xabre and Creative aims to do the same with
3Dlabs’ new VPU architecture. Matrox, after a long development cycle, is
poised to impact the Performance segment with its triple output Parhelia
and Trident is back on the desktop with its diminutive XP4. VIA will
continue to maintain a quiet presence in the discrete desktop segment with
the SavageXP from S3.

Jon Peddie Research estimates that 39.75 million graphics devices
shipped for all segments of the personal computer industry in the second
quarter of 2002. This represents a 2.5% decrease from 40.79 million units
shipped in Q1’02 and an 11.5% increase from 35.60 million units shipped
in the same period the previous year.

Of the graphics devices shipped in Q2’02, 32.13 million or 81% were
desktop controllers and 7.62 million or 19% were mobile display
controllers. Seven suppliers accounted for over 99% of all graphics
shipments during the quarter. The relative share of the total market for
these suppliers over the past two quarters is shown in the following

Total graphics market share in Q1’02 and Q2’02

As the previous charts show, major chipset suppliers Intel, SiS, and
VIA all grew their market share shares in Q2’02 while major discrete
controller suppliers Matrox, Nvidia, and Trident saw market shares
decline. ATI maintained it’s position in the market with strong
shipments of discrete mobile controllers.

Intel’s activity greatly affected the ratio of discrete vs.
integrated controllers shipped in Q2’02. The ramp of the 845G chipset
created a shift away from discrete desktop controllers and towards desktop
IGCs during the period. Within the IGC segment, desktop shipments
increased 52% in Q2’02 over the previous quarter. Discrete desktop
controller shipments declined 18% in Q2’02 from the previous quarter.

On the notebook side, mobile display controllers accounted for 19% of
total graphics shipments in Q2’02, unchanged from Q1’02 and up from
17% in the same period the previous year. Discrete controller share within
the mobile segment was up significantly – from 57% in Q1’02 to 68% in
Q2’02. Most major suppliers now participate in the mobile segment,
recognizing its potential for growth.

Market Watch and GMI

Jon Peddie Research, a leading graphics and multimedia research and
consulting firm, has just released Market Watch Q2’02. The detailed
report takes an in-depth look at activity in the PC-based graphics market
for the second calendar quarter of 2002 and contains shipment data,
analysis, and forecasts for all industry segments through 2003.

Jon Peddie’s Market Watch provides graphics unit shipments by quarter,
shipment forecasts by quarter, supplier market share, performance and
price segmentation for graphics devices, as well as product news, design
wins, financial results, market share, and share price performance for
leading suppliers.

Graphics Market Index through August, 2002

In the face of an ongoing slowdown in the PC market, many companies in
the technology sector announced poor financial results in Q2’02. This
has helped to depress the share price of virtually all graphics suppliers’
publicly traded stock.

Market Watch Table of Contents in Brief

Desktop Graphics Controller Shipments and Comparisons
Desktop Graphics Controller Forecast
Mobile Display Controller Shipments and Comparisons
Mobile Display Controller Forecast
Product and Financial Information for Leading Graphics Suppliers