Graphics chip shipments fell during the first quarter this year, but could stabilise later this year as people look to upgrade PCs with new operating systems, according to Jon Peddie Research.
Operating systems like Apple's Snow Leopard and Microsoft's Windows 7, which may be released later this year, could enhance the multimedia experience for users and provide a compelling reason to buy new PCs, said Jon Peddie, president of the research firm.
Both operating systems have specific features that use graphics processing units (GPUs) to boost the performance of multimedia applications, Peddie said. The operating systems will have features to unload specific multimedia tasks - like video editing - directly to graphics chips, while keeping CPUs free to execute generic computing tasks like word processing.
These features are already available in existing operating systems like Microsoft's Vista and Apple's Mac OS X, but aren't completely integrated in the OS, Peddie said. The offloading capabilities will be more robust in Windows 7 and Snow Leopard, he said.
Graphics chip makers like Nvidia and AMD, which sells graphics chips under the ATI brand, are already delivering Windows 7 drivers to accelerate multimedia applications on the OS.
Nvidia and ATI are also putting finishing touches on new parts, which may become available by the time the new operating systems come out, Peddie said. The new graphics chips will provide better graphics and could be a reason for people to buy new PCs.
New graphics chips and pricing competition from ATI and Nvidia could also stimulate demand pent-up demand for graphics chips. ATI took the first step on Tuesday, releasing one of the first sub-$100 graphics card, the Radeon HD 4770, aimed at users looking for light gaming.
Demand for PCs generally rises whenever there is a new processor, graphics processor or operating system on the market, said Kelt Reeves, CEO of PC maker Falcon Northwest.
"Anytime there's a major new launch, we always see a spike," Reeves said, whose firm sells high-end PCs targeted mainly at enthusiasts like gamers.
Windows 7 will include many improvements to boost gaming, but there are question marks surrounding its release date, Reeves said. There's a notion that Windows 7 may come out later this year, but Microsoft could drag its development into next year. Reeves is urging people not to wait until the release of Windows 7 to upgrade PCs, he said.
But questions remain about when demand for PCs will reach normal levels.
Two weeks ago, Intel CEO Paul Otellini said PC sales bottomed out during the first quarter, and that demand was returning to normal seasonal patterns. AMD last week was a bit more sceptical, with CEO Dirk Meyer saying that there were signs user demand for PCs stabilised during the first quarter. Neither provided a future outlook.
If PC demand doesn't stabilise, GPU shipments could continue to fall. Graphics chip shipments dropped to 74.9 million units during the first quarter of 2009, down 21.1 percent from the same period last year.
Intel was the leading graphics chip vendor, holding a 49.7 market share, though its shipments fell 8.2 percent compared to last year's first quarter. Nvidia was in second place with a 31.1 percent market share, with its shipments falling 25 percent. AMD was in third place with a 17.1 percent market share, and its shipments fell 27.5 percent.
Most of Intel's graphics chips are integrated graphics chipsets. ATI and Nvidia ship GPUs that go on discrete graphics cards.