Intel Gains Processor Market Share Despite Chipset Problem: IHS iSuppli

A flaw in a chipset connected to its "Sandy Bridge" chips did not keep Intel from gaining market share in the first quarter, according to a report from IHS iSuppli.

For all the attention surrounding the chipset design flaw soon after Intel's "Sandy Bridge" processors were released earlier this year, the issue had little, if any, impact on the giant chip maker's performance in the first quarter, according to market research firm IHS iSuppli.

In a report June 29, IHS iSuppli analysts said that Intel grew its dominant position in the worldwide processor market, grabbing 82.6 percent of the sector's revenue during the first three months of the year. That was 1.6 points more than in the fourth quarter of 2010 and 2 percentage points over the first quarter of last year.

At the same time, rival Advanced Micro Devices saw its market share slip to 10.1 percent, down from 10.9 percent in the previous quarter and 11.8 percent in the first quarter of 2010.

That said, Intel and AMD-easily the top two chip makers in the world-saw their combined share increase, with the two together taking 92.7 percent of the revenue in a market that grew by 20 percent overall. Intel and AMD had 92.4 percent of the market in the first quarter of 2010.

IHS iSuppli analyst Matthew Wilkins credited Intel's handling of the widely publicized chipset flaw-which forced the vendor to replace some 8 million chipsets-for enabling the company to overcome what for many others would have been a disastrous situation.

"Intel moved quickly to identify and correct the Sandy Bridge chipset issue during the first quarter," Wilkins said in a statement. "The fact that the company achieved a 25 percent increase in revenue in the first quarter of 2011 compared to the same period in 2010 shows that its chipset concern did not really affect the company to a significant degree. This serves as a testament to Intel's capability to react to a potential crisis with speed and agility. Intel's handling of the issue on both the public relations and business fronts stands in stark contrast to other recent examples of big companies facing major product quality challenges."

Weeks after rolling out the first of their Core chips sporting the Sandy Bridge architecture at the 2011 Consumer Electronics Show, Intel officials on Jan. 31 announced that there was a design flaw in the 6-Series chipset-dubbed "Cougar Point"-and that they would have to recall and replace the chipset at a cost of about $1 billion.

It also caused a delay in the launch of some other Sandy Bridge chips in the spring.

The announcement of the flaw was a proactive move that some analysts said would affect Intel at least in the short term. During the same CES conference, AMD officials rolled out the first of their Fusion APUs (accelerated processing units), which like Sandy Bridge integrated high-end graphics technology onto the same piece of silicon as the CPU.

Several PC OEMs, including Hewlett-Packard and Samsung Electronics, offered refunds and replacements for PCs that incorporated the defective chipset. It also prompted AMD officials to boast a couple of months later that Intel's chipset problem gave their own business a boost.

"We have some customers and retailers who have come to us specifically as a result of Intel's chip problem," Leslie Sobon, AMD vice president of product and platform marketing, said in an interview with Dow Jones Newswires in March. "Some retailers have had to take things off their shelves, so they call us to ask what they could get from our OEMs that's similar. And OEMs are asking us for product, as well."

However, whatever gain AMD might have seen was short-lived, according to the numbers from IHS iSuppli.

Despite its strong performance, Intel will continue to be challenged by the growth of tablets, according to the research firm. Although Intel is working hard to crack into the tablet space, the market is dominated by chips designed by ARM Holdings and made by the likes of Qualcomm, Nvidia, Texas Instruments and Samsung.

Intel in April released its Atom Z670 "Oak Trail" chips that target tablets, and company officials said they expect almost three dozen system designs based on the platform to be released this year. In addition, Intel will be releasing its "Cedar Trail" platform for tablets by the end of 2011, and also has introduced the company's Tri-Gate transistor architecture that they say will significantly drive up performance while reducing power consumption, key metrics for such mobile devices as tablets and smartphones.