The workstation market finds a bottom in Q2’09, reports Jon Peddie Research

Leading indicators point to better times ahead

Robert Dow

Hoping to erase some bad memories from the previous two quarters’ market results, vendors of workstations and professional graphics hardware had a lot riding on the second quarter of 2009. Jon Peddie Research reports that, considering the doom and gloom pervading global markets since last fall, Q2’09 managed to deliver on expectations that were modest, yet critical to providing an indication of the market’s direction.

Q1’09 had showed more of the carnage that engulfed global markets in the fourth quarter of ‘08. But mercifully, as the research firm had expected, Q2’09 showed some much-needed consistency in the market, adding more evidence that demand has bottomed and a recovery is in the offing. All told, the second quarter saw 602 thousand workstations shipped, up 4.4% sequentially and down 31% year over year, the latter figure presenting a drop consistent with Q1.

(Source: Jon Peddie Research)
Workstation market results Q1CY08 Q2CY08 Q3CY08 Q4CY08 Q1CY09 Q2CY09
Units (K) 822.6 867.4 854.2 764.3 576.7 602.1
Total ($M) $1,891.0 $1,864.3 $1,831.7 $1,579.8 $1,107.7 $1,161.8

And looking forward, the quarter’s market results offered up some nuggets of data that — in combination with improving macroeconomic global indicators — affirm the firm’s outlook for a cautious, yet discernible, move back up starting in the second half. ASPs held strong, while the related market for professional graphics revealed the first hints of a rebound.

A bright spot: ASPs stay firm in Q2’09

In the face of the deflationary pressure triggered by the slashing of IT budgets, ASPs had fallen by 7.1% in Q1’09. But the second quarter showed ASPs staying relatively flat (+0.5%), thanks to stabilizing demand and the introduction of a new generation of workstation platform technology (Nehalem). Stable demand might not typically be cause for celebration, but in the context of very atypical recent history, it’s a critical first step toward a return to the robust market conditions of ’07 and early ’08.

Professional graphics market results foreshadow improving conditions

Responsible for over $1.1 billion in revenue (2008, not counting mobile shipments), the market for professional graphics hardware is significant in its own right. But it’s also of interest as a revealing leading indicator, since it supplies one of the key differentiating components in today’s workstation platform. Whichever direction the results of the professional graphics market head, the workstation market’s numbers often fall in line behind it.

And in Q2’09, the direction appeared up, as the industry shipped 825 thousand units (including mobiles). That volume represented a similar year-over-year loss as seen the previous two quarters, but resulted in a fairly optimistic sequential growth of 16.2%, a number significantly higher than what could simply be attributed to cyclical conditions.

AMD takes more overall share in Q2’09 … but Nvidia not exactly suffering

AMD’s FirePro line for professionals is on its best footing in years, a position reflected in professional graphics market results in Q4’08 and Q1’09. In those two preceding quarters, AMD managed bumps in overall unit share (add-in cards and mobiles) of 8.8% and 12.1%, respectively. Thanks to a jump in professional mobile GPU shipments, the company continued in the right direction in Q2’09, adding another few points of share to climb to 14.4%.

But while AMD’s numbers are clearly healthier in the context of mobile shipments, to say Nvidia is suffering would be off the mark. Because, if we were to remove mobile units from the picture and focus on add-in cards only, the story reads differently. In the face of AMD’s market incursion, market leader Nvidia actually raised its share of units and revenue in Q2’09 to 89.4% and 90.3%, respectively (from 87.6% and 89.3%).