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Mercury Research recently released its graphics solutions market watch uncovering some pretty interesting details. While NVIDIA maintained its lead in desktop PC markets, its overall market share dipped a little bit below ATI.

Graphics Market as a Whole: Intel Maintains Lead

The quarter itself was pretty successful for the market in general. Apparently, the number of graphics solutions shipped increased by about 13%, a huge move upwards that should positively impact everyone in the industry.

As reported previously, Intel supplied 31.7% of all graphics solutions during the fourth quarter of 2003. ATI commanded 24.9% of the market and NVIDIA’s share dropped to 24.7%. VIA Technologies also managed to gain 1% and effectively got 10% of the market. Silicon Integrated and Matrox Graphics did not perform any tangibly better and stayed with 8% and less than 1% shares respectively.

Given that the market grew strongly, it is highly possibly that all companies except Matrox Graphics, but including Intel and NVIDIA, posted higher unit sales. If the assumption is correct, we should anticipate a positive impact on the firms’ financial results.

Standalone Graphics Processors: the Gap Narrows

Market growth of standalone graphics chips was at healthy 18%, even higher compared to the growth seen by the overall market. This is a good news for leading chip companies, primarily NVIDIA and ATI.

Since NVIDIA continued to lose the ground, while ATI kept on winning larger market shares across desktop and mobile markets, the gap between ATI and NVIDIA was 5% in the last quarter of 2003. NVIDIA commanded 50% of the market (down 3% from Q3 2003), ATI’s share was 45% (up 5% from Q3 2003), Matrox had about 2% (flat sequentially) and SiS/XGI also occupied roughly 2% as well (down from 3% a quarter before).

As the main driving forces of standalone graphics chips market, both ATI and NVIDIA probably saw a serious bump in the number of units the sell.

Desktop Graphics: NVIDIA Solid, ATI Assaults

The 11% growth of the desktop graphics market should be probably attributed to increase in sales of ATI and NVIDIA, as Intel dropped 4% of its desktop market share in Q4 2003.

Intel had 34%, NVIDIA commanded 28% of the market (1% down sequentially), ATI’s share was 18% (up 4% from the previous quarter). VIA Technologies, SiS and Matrox Graphics produced 11%, 8% and 1% of all desktop graphics solutions.

Desktop Standalone Graphics Chips: ATI Pushes the Gas

The number of graphics processors sold in Q4 was up 19% quarter-over-quarter, an amazing increase that significantly overpasses growth in other desktop markets seen during the last quarter of 2003.

Desktop standalone segment, the key market for both ATI and NVIDIA, is where ATI actually accelerated during the fourth quarter of 2003. Thanks to the successful RADEON 9800, 9600 and 9200 series, ATI managed to grab additional 6% of the market and supplied 38% of all desktop VPUs. NVIDIA’s share dipped by 4 points to 38%. Matrox Graphics and SiS/XGI sold 3% and 1% of standalone graphics chips for desktop PCs respectively during the quarter.

ATI Technologies and NVIDIA probably again posted solid quarter-over-quarter unit growth, what cannot be said about SiS/XGI, whose market share is down 2%.

DirectX 9 Graphics: NVIDIA Wins Low-End!

While the details about the DirectX 9.0 market are pretty unclear, we do know that NVIDIA shipped 5.5 million DirectX 9.0 compatible graphics processors in Q4 2003, up from 4.2 million in Q3. The result of the move was 3% gain in DirectX 9.0 Value segment to 75%, which means ATI commanded the remaining 25%; and flat 68% share of total DirectX 9.0 market compared to the previous quarter.

Generally speaking, ATI continues to win with its high-end and mainstream RADEON 9800 and RADEON 9600 series VPUs, while NVIDIA’s big success is the lower-end GeForce FX 5200.

Desktop Integrated: No One Fights Intel!

Customers obviously did not want to buy a lot of cost-effective personal computers in the last quarter of the year, which is the reason for moderate 6% unit growth of the market.

Where NVIDIA and ATI really cannot fight Intel is the market of chipsets with integrated graphics cores. Where Intel had 63%, still 4% down from the previous quarter because of competition from VIA and SiS, NVIDIA commanded just about 2%, a point down, while ATI’s share was less than 1%. Taiwan-based VIA and SiS occupied 20% and 15% of the market in that order, up 3% and 2% sequentially.

RADEON 9100 IGP allowed ATI to sell two times more chipsets in Q4 than in Q3, but since ATI’s market share was still below 1%, there is hardly an impact ATI made to the industry with its advanced core-logic. Share of NVIDIA’s nForce2 IGP dropped during the Q4 as a result of shift towards Athlon 64 platforms as well as discrete solutions.

Mobile Graphics: ATI, NVIDIA Tumble

In the market of mobile graphics there is a pretty clear trend towards affordable chipsets with integrated graphics core. What we saw in the desktops a number of years ago is now likely to start happening in the mobile. The market itself expanded by 18% last quarter, an impressive result that surpasses increase in desktop graphics shipments by 7%.

Taking into account the fact that a lot of Intel Centrino notebooks are sold with Intel’s integrated graphics inside, we may be pretty sure that Intel’s unit numbers will hardly waterfall, therefore, the company may start winning larger and larger market shares.

In the fourth quarter ATI was still an indisputable leader of the mobile graphics market, even though its share dropped a point to 55%. Intel was 2 points up at 23%, NVIDIA was 1% down to 11%. SiS/XGI and VIA accounted for 5% and 5% of the market.

Mobile Standalone Chips: ATI Increases Lead, NVIDIA Posts Units Growth

Both NVIDIA and ATI posted a nice mobile GPU unit growth for the fourth quarter of 2003. Being more aggressive, ATI succeeded in occupying 73% of the market, the highest share in the recent history of the company. NVIDIA stayed with its 21%. SiS/XGI as well as Silicon Motion commanded 5% and 1% respectively.

The market itself experienced a 13.3% growth, below overall because there were more notebooks sold with integrated graphics.

Mobile Integrated: Intel Fights Back

Chipset companies shipped 23.5% more mobile core-logic products with integrated graphics in Q4 compared to Q3.

While Intel will hardly attain its former 75% market share in the field of integrated chipsets for laptops, the Santa Clara, California-based company nearly doubled its share throughout the year 2003. Intel now commands 48%, ATI has 36% (down 3 points quarter-over-quarter), shares of SiS/XGI and Trident are 10% and 6% respectively.

Fresh Trends or Exceptions?

In the fourth quarter of 2003 we saw that standalone graphics processors for desktops performed a successful attack on chipsets with integrated graphics solutions. It is pretty hard to explain exact reasons for this, but it would be logical to assume that a lot of home users acquired graphics cards to play next-generation games on PCs. Such trend will hardly last long and, unless there is a solid growth in the sales of personal computers, the number of units supplied by companies like ATI and NVIDIA is also likely to decrease.

With more advanced chipsets with integrated graphics cores coming out throughout 2004, integrated chipsets are likely to regain their positions and put more pressure on market shares of NVIDIA and ATI. However, in case the industry sees a healthy rebound this year, sales of graphics chips companies will not be in danger.

In contrast to desktops, laptops with integrated graphics become increasingly popular. This is also not a big surprise, as majority of end-users do not play 3D games on their notebooks, therefore, a cost-effective integrated solutions suits them pretty well. It definitely makes sense to expect mobile integrated to eat a piece of mobile standalone market in future.

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