PC processor shipments to drop in 2009, IDC says

IDC says PC processor demand fell in Q4 and will continue to decline in 2009.

PC microprocessor shipments slowed in the fourth quarter and will continue to decline this year, according to an IDC survey released on Wednesday.

Microprocessor unit shipments will decline by about 15 percent in 2009 compared to last year, according to preliminary numbers from the market researcher. Worldwide microprocessor shipments during the fourth quarter dropped 17 percent sequentially and 11.4 percent year-over-year, IDC said.

The research firm couldn't quantify the number of microprocessor shipped during the fourth quarter, but the fall was precipitous, said Shane Rau, research director at IDC.

"After hinting at a decline last September, the market fell of a cliff in October and November," Rau said.

The worldwide recession has slowed PC demand which will continue to affect microprocessor shipments. Worldwide PC shipments fell 0.4 percent year-over-year in the fourth quarter of 2008, IDC said in study released last month. Shipments of netbooks totaled 10 million in 2008, but strength in netbooks was outweighed by slow or even declining sales of traditional laptop and desktop PCs.

Intel took a big chunk of the server, mobile and desktop chip space from its rivals, Advanced Micro Devices and Via Technologies.

Intel's market share in unit shipments was 81.3 percent in the fourth quarter, up from 80.8 percent share in the third quarter and 76.7 percent in the fourth quarter a year earlier. AMD had a 17.7 percent share in the fourth quarter, down from 18.5 percent during the third quarter and 23.1 share it had a year earlier. Via Technologies held a 0.4 percent share during the fourth quarter, compared to 0.2 percent it had the previous year.

After dominating most segments, Intel is now looking for new markets to grow, Rau said. The company has its feet wet in the mobile space with chips like Atom for mobile devices, but the competition is intense from entrenched competitors like Texas Instruments and Qualcomm, Rau said. These markets are either flat or in decline because of the recession, which also poses a big challenge for Intel.

Beyond entering new markets, Intel on Tuesday announced it would try to provide faster chips by shifting to the 32-nanometer manufacturing process. The move should stimulate chip demand for Intel and help it gain market share over rivals, Rau said.

"Intel is enabling its customers to build better products rather than just cutting price," Rau said.

Intel already dominates the netbook space with its Atom processor, though Via could present some challenges. The small chip vendor can provide inexpensive chips for netbooks and enable new form factors, so customers may look at its chips as an Intel alternative.

As long as Via continues to ramp its C7 and Nano processors, it will inevitably gain some share though the numbers are hard to quantify, Rau said.

"[Via] is more a rebel with less to lose," Rau said.

Intel's primary rival, AMD, has held a steady market share in desktop processor shipments, but has been volatile in the mobile processor space. It hasn't been able to match Intel on pricing and features on mobile chips, Rau said.

The news for AMD is better in the server space, where it recovered from the earlier Opteron server chip mistakes with a new chip codenamed Shanghai it shipped last year. Unfortunately the recovery came when the worldwide economic crisis began, which has slowed down adoption of its server chips. But the company is well-placed to see those chip shipments rise as economies recover.

AMD's worst competitor is itself, and its strategies tend to work best if it doesn't focus on competition with Intel, Rau said. AMD's products on the crosshairs of specific market segments dominated by Intel -- like the Athlon Neo for ultrathin laptops -- have worked in the company's favor.

But with the recession, AMD needs to focus more on surviving in the market, not market share, Rau said. The company is spinning off its fabs and lowering its cost structure through downsizing.

But AMD has a price advantage over Intel, Rau said. If the company releases chips on time and lowers the cost structure, it will have better control over pricing its products. That could bring the company back into contention against Intel.

"No one should think that AMD's going away... the market needs two viable competitors to remain competitive," Rau said.

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