Low-Cost Notebooks Propel Intel, Via in Q2

The low-cost notebook market helped Intel and Via Technologies increase their share of the worldwide x86 microprocessor market in the second quarter of 2008, while Advanced Micro Devices' share slipped, according to an Aug. 7 report from Mercury Research.

While mainstream notebooks have been driving the x86 chip market for some time, the Mercury report found that demand for low-cost laptops, or "netbooks," helped drive shipments of Intel's Atom processor and Via's C7 chip. Via has also introduced a new chip for this market called Nano in May.

At the same time, AMD, which does not have its own processor for this market, watched its shares slip during a quarter that is traditionally a slow period for chip makers. AMD has signaled that it does not intend to enter the netbook market anytime soon.

For the second quarter, Intel claimed 79.4 percent of the worldwide x86 market compared with its 76.3 percent share in the second quarter of 2007. AMD's share decreased from 22.9 percent in 2007 to 19.3 percent in 2008. Via watched its share jump to 1.3 percent from less than 1 percent a year ago.

Overall, the x86 microprocessor market grew 18 percent over the second quarter of 2007, which was unusual compared with previous periods.

"What happened in terms of market share [was that] Intel and Via grew and AMD did not," said Dean McCarron of Mercury Research. "The math basically forces the market share to go to the players that grew. Normally you don't see Q2 as a growth quarter. Typically, the second quarter is flat growth or slightly down … Both Intel and Via took advantage of this expansion in the bottom end of the market with the Intel Atom and the Via C7."

While it's hard to draw conclusions from these numbers, McCarron said one reason for the growth of netbooks in the quarter might be the state of the economy, with consumers looking for less expensive laptops.

Although shipments of notebook chips were up this quarter, McCarron said desktop processors, for both corporate clients and consumers, were down. On the enterprise side, McCarron found processor shipments for servers were up and AMD had bounced back following problems associated with its quad-core Opteron chips.

In addition to the Mercury report showing that netbook shipments were increasing, a Citigroup research note released Aug. 7 also found demand for the Intel Atom growing. The Citigroup report, written by analyst Glen Yeung, found that demand for the Intel Atom was stronger than expected and OEMs such as Lenovo, Asustek Computer and Acer were helping to increase that demand.

"We believe actual netbook demand has been stronger than expected, limited by Intel processor availability, and within this, Intel has only seen limited competition (Via only)," Yeung wrote.

The next major vendor to enter this market should be Dell. In the Citigroup report, Dell's netbook is called the Dell E, and it will offer an 8.9-inch wide display, use the Intel Atom and support either Microsoft Windows XP or Ubuntu Linux. The Dell E will retail for about $300.

Hewlett-Packard, on the other hand, is using Via's C7 processor for its 2133 Mini-Note laptop. This notebook sells for about $499.

The Citigroup report also notes that Intel will launch a new Atom processor for the low-cost desktop market sometime in the third quarter. This new chip will have a larger Level 2 cache and will offer at least two processing cores.