Intel's Atom Chip Propels Worldwide Processor Market in the Third Quarter

A new report from IDC finds that Intel's Atom processor, a chip designed to create a whole new market of low-cost desktop and notebooks, helped propel the entire microprocessor market in the third quarter of 2008. The results meant that Intel kept its dominance in the overall market. AMD, meanwhile, watched as its market share of notebook processors shrank, but the company did gain back some momentum in the server and workstation segment thanks to its quad-core Opteron processor.

Intel's Atom processor is starting to have a significant impact on the overall microprocessor market, as shipments of the chip for a series of low-cost notebooks and desktops helped the world's processor market grow in the third quarter of 2008, according to a new IDC report.

Overall, shipments of microprocessors for PCs and servers grew 15.8 percent in the third quarter of 2008 compared with same time period a year ago. Revenue from chip sales increased about 4 percent for a total of $8.3 billion. Without the Intel Atom processor, shipments would have only increased about 8 percent, according to the Nov. 3 IDC report.

The IDC report did note that while shipments and revenue increased in the third quarter, the fourth quarter remains difficult to calculate since the financial crisis and credit crunch in the United States started to intensify in September. On Oct. 31, Intel issued a warning that the credit crunch could begin having an impact on its business, since its enterprise customers might have trouble financing the purchases of new PCs and server systems.

Intel has called for its fourth-quarter revenue to fall between $10.1 billion and $10.9 billion, which is below seasonal averages.

In the meantime, Advanced Micro Devices, Intel's main rival in the x86 chip market, watched its share of mobile processors slip, but the company did manage to increase its share of the server and workstation market thanks to its quad-core Opteron processor.

"Not considering the effects of Atom, the overall market still grew at a decent pace in [the third quarter of 2008]," Shane Rau, an analyst at IDC, wrote in a statement. "Intel's and AMD's shipments grew at a rate only slightly slower than typical for a third quarter; seasonal demand appeared reasonable up until September. By segment, while the mobile processor segment grew aggressively, the server segment was soft."

The influence of Intel's Atom processor for low-cost notebooks, or "netbooks," was on display in the last week of October, when Dell, Lenovo and Hewlett-Packard all released new laptops built around the Atom chip. By the end of 2008, shipments of low-cost notebooks are expected to top 10 million units, with some of the biggest sales coming in the United States and Western Europe.

In the overall x86 market, Intel's share of microprocessor shipments topped 80 percent, an increase of 1.1 percent from a year ago. AMD lost 1.2 percent of its market share for a total of 18.5 percent. Via Technologies, which makes low-watt processors for netbooks, only accounted for less than 1 percent of the total market.

Intel controlled about 87 percent of the world's mobile chip shipments, while AMD accounted for about 11.5 percent, a decrease of about 1 percent from 2007. Via accounted for about 1.2 percent of the market. On the desktop side, Intel controlled about 73.5 percent, while AMD held 26.4 percent.

The one area where AMD gained market share from Intel was within the server and workstation market. Here, AMD's market share stood at about 14 percent, a gain of less than 1 percent from a year ago. Meanwhile, Intel lost about 1 percent of its share, and the company now accounts for about 85 percent of chip shipments to this market.

While the positive news through the first three quarters of 2008 has meant that IDC will raise its chip forecast for the year to 18 percent growth, the research firm believes that the overall economy will have a significant impact on the market in 2009. Researchers now plan to lower their forecast for next year.