Intel 'Sandy Bridge' Sales Disappoint, AMD Benefits: FBR

Intel's "Sandy Bridge" chips may not be ramping up notebook PC sales as much as expected, an FBR analyst says. Intel's chipset design flaw may be to blame, which could help AMD in the short term.

Intel's "Sandy Bridge" processors may not be exciting the PC user base as much as the chip maker may have expected, according to one analyst.

In a March 31 report, FBR Capital Markets analyst Craig Berger said that after checking with the top six notebooks ODMs (original design manufacturers), overall builds of PCs in the first quarter were lower than anticipated, and that similar results could happen in the second quarter. Intel's release of its 2^nd-Generation Core chips-first introduced at the 2011 Consumer Electronics Show in January-has not kicked up notebook demand as much as expected, despite such features on the new chips as the CPU and graphics being on the same piece of silicon.

"While notebook demand could improve, and builds could get ratcheted up by June, our contacts suggest Intel's Sandy Bridge products are not stimulating as much end demand as expected, likely impacting AMD, too," Berger wrote.

Intel and Advanced Micro Devices both unveiled processors with integrated CPUs and discrete-level GPUs (graphics processing units) on the same die around the same time, a move designed to improve such functions as high-definition video, 3D rendering and gaming on systems. It also will improve space and cost savings and improve the energy consumption of the systems, enabling PC makers to build thinner, lighter and more power-efficient PCs and notebooks.

That type of architecture will resonate with PC makers and end users, according to a March 16 report by market research firm IHS iSuppli. In the report, the analysts said GEMs (graphics-enabled microprocessors) will appear in half of the expected 230 million notebooks sold this year, and in 45 percent of the desktop PCs. Those numbers will rise to about 83 percent of notebooks and 76 percent of desktops shipped in 2014.

"Computers today are serving up ever-richer multimedia experiences, so the graphics capabilities of PCs have become more important, driving the rising penetration of GEMs," Peter Lin, principal analyst for compute platforms at IHS iSuppli, said in a statement at the time.

Intel President and CEO Paul Otellini has predicted that the 32-nanometer Sandy Bridge platform will account for a third of the company's 2011 revenue and will generate more than $125 billion in revenue for the PC sector. However, the Sandy Bridge chips have yet to catch on the way many analysts expected, according to FBR's Berger said. Industry observers have debated since Apple released its iPad last year whether burgeoning tablet sales would eat into the notebook market.

That said, what probably is hurting Intel-and helping rival AMD-is the situation with the design flaw chipset that Intel encountered in its 6-Series chipset, dubbed "Cougar Point." Announced Jan. 31, the flaw affected four of six SATA (Serial ATA) ports in the chipset, which over time could cause problems in the performance of such PC peripherals as the SATA hard-disk drive or optical drive. Intel executives had estimated that the problem would affect 5 to 15 percent of the chipsets made, but stressed that the issue was with the chipset and not the Sandy Bridge processors.

Intel eventually started reshipping the Cougar Point chipsets for systems that would not be impacted by the design flaw, and has since corrected the problem. AMD officials said they expected to benefit from Intel's problem, but Berger said that any bump could be short-lived. He expects AMD's first-quarter revenues to hit or exceed the high point of expectations, but it may not carry over into the second quarter.

"So, if AMD does achieve the high end of revenue guidance, or potentially better, the upside is likely short term in nature and due to customers turning to AMD for product when Intel's Sandy Bridge was less available due to the chipset bug recall," Berger said in the note. "For 2Q, we think AMD's revenues will fall [quarter over quarter] given its 14th week in 1Q, Intel chipset goodness unwinding, and sluggish desktop builds, still rather unexciting."