Intel Weathers First-Quarter Downturn

A report by Mercury Research finds that AMD lost market share to Intel in the first quarter of 2008 due to decreased demand for its notebook chips.

Intel held its own in the first quarter of 2008 while its smaller rival, Advanced Micro Devices, shipped fewer notebook microprocessors in the quarter and lost some of its market share, according to an April 23 report from Mercury Research.

In the first quarter, Intel's share of the x86 microprocessor market hit 78.5 percent, an increase of more than 3 percent from the fourth quarter of 2007. However, Intel's share of the market declined 2.5 percent compared with the first quarter of 2007.

For AMD, which reported another quarterly financial loss April 17, market share dropped from 23 percent in the fourth quarter of 2007 to 20.6 percent in the first quarter of 2008-a decrease of about 10 percent. AMD did gain back 10.2 percent of market share from the first quarter of 2007.

The Mercury report measures worldwide shipments of x86 processors.

AMD's trouble in bringing its quad-core Opteron processor for servers to market has been well chronicled, and Dean McCarron, an analyst with Mercury Research, said that company actually shipped fewer notebook processors in the first quarter, which allowed Intel to gain overall market share.

For the quarter, shipments of x86 microprocessors declined about 8 percent. Normally, the market declines about 6 percent from the fourth quarter to the first quarter, although McCarron said the sluggish U.S. economy did not have a noticeable affect on the overall market.

One reason is that the United States accounts for about 20 percent of all global shipments of x86 processors. While the market shrank in the first quarter, Intel weathered the storm thanks to an uptick in server revenue and a continued interest in notebooks from both consumers and enterprise buyers.

"Across the board, there weren't any indicators of the slower U.S. economy affecting the processor figures, and one reason for that is that the U.S. accounts for 20 percent of the overall market," McCarron said. "If you look at the nitty-gritty of Intel's first-quarter report, the company showed that it increased its server sales in North America and a lot of what was driving that started in the middle of last year when companies began to upgrade their servers."

The reason that AMD declined in the first quarter is that it relies heavily on the consumer market, in which buyers tend to spend less in the first quarter of any given year, McCarron said, while Intel, which did see its shipments decline, is more diversified in its offerings and can rely more on enterprise sales and thus gained market share in the quarter.

The number of desktop processor shipments declined in the first quarter and McCarron said he believes Intel will see its mobile revenue overtake its desktop revenue sometime in the second quarter, which continues to show the importance of the laptop market.

By the fourth quarter, the entire microprocessor market will see more revenue from laptops than desktops, according to Mercury Research.