Intel, AMD Hold Steady in Chip Market

AMD stopped a string of quarterly losses, but Intel still controls about 80 percent of the global processor business.

The microprocessor market held steady in the second quarter of 2007, according to the latest survey by iSuppli.

The only major difference, according to the July 19 report, was that Advanced Micro Devices gained back a small share of the market, reversing several quarters of losses. The iSuppli study measured the market in terms of percentage of revenue.

For the quarter, Intel held 80.3 percent of the market, compared with AMDs 11.4 percent share. Intel lost a half of a percentage point from the first quarter, while AMD gained back about a half of a percentage point.

The other microprocessor vendors accounted for about 8 percent of the market.

While Intel, which on July 16 launched several additional quad-core Xeon models for high-end and gaming PCs, continues to dominate the x86 market, AMD managed to stop its reversal, gaining back a fraction of the market share that it has lost since 2006.

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In the second quarter of 2006, AMD held 16.4 percent of the market, but watched that number dwindle to 10.9 percent in the first three months of 2007 before picking up a little share this quarter, according to iSuppli.

Part of the reason is that the average selling price of Intels chips fell during the quarter, which seems to show that the pricing battle between the two companies remains vigorous and still affects the quarterly outcome, according to the report.

"The main cause of the market-share reversal of fortune was a decline in Intels microprocessor Average Selling Prices (ASPs)," Matthew Wilkins, an iSuppli analyst, wrote in the report. "This caused Intels revenue share to decline—although its microprocessor unit shipments were up sequentially."

In Intels second-quarter financial report, released July 17, Intel executives said the Santa Clara, Calif., companys gross margins—a key metric among microprocessor companies—were 46.9 percent, which was short of its forecast of 48 percent for the quarter. Intel expects its gross margins to climb to about 52 percent in the third quarter.

Click here to read about AMDs investment in Transmeta.

Industry watchers say Intel is preparing to cut chip prices soon. AMD cut some of its prices earlier in July.

Overall, Intel posted net earnings of $1.3 billion and revenue of $8.7 billion. AMD is expected to post its latest quarterly report after the markets close July 19.

The third quarter of 2007 should see the battle between Intel and AMD heat up again. AMD is preparing to launch its quad-core Opteron processors, code-named Barcelona, in August, and the chip should start shipping in volume by September.

Intel is planning to release its "Caneland" platform for multiprocessor servers in the third quarter, followed by its "Penryn" family of 45-nanometer processors later in 2007.

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