Intel Dominates x86 Chip Market That Saw Record Revenues in the Third Quarter

Intel lost market share to AMD during the third quarter, which saw dismal growth but nonetheless set a record for CPU revenue, thanks to increased selling prices.

The x86 processor market, again led by Intel, set a record for revenue in the third quarter of 2010, despite posting growth that was well below expectations for the season, according to a new report from Mercury Research.

The average selling price per CPU increased in the third quarter, making it a full year that the price paid per CPU rose, and leading to a market total revenue of $9.5 billion for the quarter, according to the Oct. 27 report from Mercury.

Intel lost overall chip market share to Advanced Micro Devices during the quarter, falling slightly, to 80.9 percent, from the second quarter's 81.3 percent. AMD's share, in turn, rose to 18.3 percent, from 17.8 percent the quarter before third-place VIA dipped somewhat, claiming 0.8 percent of the market, compared with 0.9 percent the quarter before.

"AMD had mild share gains by having a slightly higher rate of growth than Intel. This is due in part to AMD having a higher mix of desktop CPUs," Mercury reported. "This quarter's results were disproportionately impacted by a weak mobile CPU market, which affected Intel more than AMD as Intel has a much higher share of the mobile market."

Despite the record revenue, growth during the quarter was just 1.9 percent - a dud, considering the past five years' average has been 13.5 percent. Additionally, all segments grew at low rates, with no segment significantly outperforming the others, though server CPUs lead the growth in the market, followed by desktops and then mobile devices.

While AMD trails Intel in market share, the competition is expected to grow more intense, as each company plans to roll out new processor platforms that will feature graphics technologies integrated onto the die.

In September, Intel executives showed off their upcoming "Sandy Bridge" second-generation Core architecture at the Intel Developer Forum, in San Francisco. The 32-nanometer chips will put CPU and GPU (graphics processing unit) onto a single piece of silicon, and are designed for tasks such as handling high-definition video.

And on Oct. 19, AMD executives at the AMD Technical Forum, in Taiwan, demonstrated the company's new "Llano" APU (accelerated processing unit), the AMD name for the integrated CPU-GPU capabilities. The Llano chip was designed for use in notebooks, ultra-thin laptops and desktop PCs. Chris Cloran, corporate vice president and general manager of AMD's client group, described it in a company blog post the day before as "the type of APU that makes you stop and stare."

Intel, in addition to facing increased competition from AMD, is expected to feel a bit of heat from discrete graphics vendor Nvidia and Snapdragon-maker Qualcomm.

Mercury stated in its report that it expects a weak fourth quarter for CPUs, with a likely growth rate of just 2.7 percent. Normal growth for the season is generally closer to 8 percent.