Intel chips away at AMD market share

Sunnyvale, Calif.-based AMD had 16.6 percent of the PC processor market, compared with 18.2 percent during the first quarter of 2002, giving up 1.6 points of market share on a year-over-year basis. Meanwhile, Intel commanded 81.7 percent of the PC processor market. That's up nine-tenths of a point from its 2002 first-quarter market share of 80.8 percent.

But when measured on a sequential basis, AMD had 2.8 points more than it had during the fourth quarter of 2002. Intel, on the other hand, saw a similar sequential decrease, said Dean McCarron, principal analyst at Mercury Research.

AMD fared well on a sequential basis because it was able to begin shipping more processors during the first quarter, after spending the latter half of 2002 sweeping away extra inventories of its Athlon chips.

During the first few months of 2002, when many in the PC industry believed a turnaround was at hand, AMD built up substantial processor inventories. When PC sales did not accelerate the way some thought they would, AMD was left with millions of extra Athlons, causing it to take corrective action, including cutting shipments of new chips. This lowered its market share year over year, according to Mercury Research.

"It was a pretty big bullet to bite," McCarron said. "The hit (that AMD) took in the third quarter was pretty phenomenal. But that's basically something it had to do if it was going to get its sales to recover."

McCarron believes that the market will settle down a bit and the two chipmakers' market share figures will be more stable throughout the rest of the year.

"I don't think we'll be seeing three-point moves quarter to quarter for the rest of this year," he said. "It would be surprising to see any movement more than about a point either way."

That doesn't mean that either chipmaker is planning to lose its edge.

Both Intel and AMD are working on faster, higher-performance processors and chipsets, chips that accompany the processors inside PCs. Intel is poised to launch a series of desktop chips--including a new chipset expected next week--that promise a boost in performance for PCs. Later, the company will introduce a faster 3.2GHz Pentium 4.

Intel helped make way for those chips by cutting prices on some processors over the weekend. It dropped the price on its 2.8GHz Pentium 4 by $113, or 30 percent, to $262. The company also cut the price of its 2.6GHz and 2.66GHz Pentium 4s by $48, or 20 percent, to $193.

AMD is working on bringing out higher-performance silicon. The chipmaker is prepping a new Athlon XP 3200+ chip for desktops and is on track to launch its next-generation chip, the Athlon 64, in September, company representatives have said.

"Going forward, the question will be, 'How does Athlon 64 ramp up?' It could well be that the Athlon XP chip becomes AMD's new value line and Athlon 64 becomes the performance line," McCarron said. "Given where Athlon XP is priced, the low end of the line is essentially against where Intel is with Celeron."

Mercury Research's overall figures include unit shipments of PC processors but don't account for whether or not the chips are built into a PC. Also included in Mercury's figures are the chips that Intel sells to Microsoft for its Xbox video game console. Without Xbox, which runs on an older Intel processor, Intel held 80.9 percent of the PC processor market during the first quarter of 2003 and AMD had 17.3 percent of the market, McCarron said.

About 1.7 percent of sales belonged to the "other" category, which includes chipmakers Via Technologies and Transmeta.