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ATI overtakes Nvidia in graphics card market

AMD unit's share surges on competitive pricing

AMD overtook Nvidia during the second quarter to become the top discrete graphics card vendor, according to market research firm Mercury Research.

AMD, which offers graphics cards under the ATI brand, held a 51.1 percent market share of all discrete graphics cards shipped during the second quarter, compared to Nvidia's 48.8 percent market share, Dean McCarron, principal analyst at Mercury Research, said on Thursday.

That is a big jump for AMD, which as recently as the first quarter held a 42.1 percent market share compared to Nvidia's 57.8 percent share. AMD held a 40.6 percent share during the second quarter last year, compared to Nvidia's 59.2 percent share.

McCarron didn't provide specific GPU shipment numbers, but said market conditions worked in AMD's favour. AMD released budget graphics cards with the latest DirectX 11 technology at the end of the first quarter, around the same time Nvidia introduced its first high-end DirectX 11 graphics card. That gave AMD a price advantage, which helped the company sell more graphics cards than Nvidia.

The low-end budget cards shifted the market in AMD's favor. By comparison, high-end cards have little impact, McCarron said. AMD last year came out with its first high-end DirectX 11 cards, but that didn't cause a market shift, he said.

AMD also had a good quarter selling mobile CPUs, which translated to higher mobile GPU sales, McCarron said. AMD has been effective in packaging CPUs and GPU into systems as part of laptop and desktop platforms. By comparison, Nvidia failed to take advantage of growing mobile GPU volumes because it lagged in chipset development.

Nvidia continues to have troubles as consumers shift to lower-priced GPUs and integrated graphics. The company on Wednesday lowered its revenue expectations for the second quarter of fiscal 2011 to between $800 million and $820 million, compared to earlier expectations of between $950 million and $970 million. Nvidia blamed higher memory costs for the lower revenue expectations.

To compensate for the higher memory pricing while keeping prices low, PC makers usually have to use cheaper processors or pull out components like graphics cards, McCarron said. That affects companies like Nvidia, whose graphics card shipments suffer as a result.

The risk of higher memory pricing could also hit AMD, said analysts from FBR Capital Markets in a research report issued on Thursday. The PC cost-reduction efforts may affect the rates at which the company's GPUs are installed in computers.

But things are looking bright for AMD, McCarron said. Apple this week dumped Nvidia, moving to AMD's graphics offerings for the new line of iMac desktops announced on Tuesday. That is a significant design win for AMD, but it won't make or break Nvidia, McCarron said.

"Apple represents a fairly meaningful volume in business," McCarron said. "It's not a make or break thing, but it's a nice sweetener."

The total number of graphics products shipped -- including integrated and discrete graphics processors -- totaled 125 million during the second quarter, an increase from the 120 million products that shipped during last year's second quarter.


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