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Despite of rapid expansion of notebooks and low-cost personal computers, the market of add-in graphics boards for demanding users increased last quarter, according to Jon Peddie Research.

There is no secret that various mobile computers are very successful this year: notebooks outsold desktops in the USA in Q3 and microprocessors for laptops left desktop chips behind on the global market in the same quarter. No surprise, the trend affected the market of desktop graphics adapters, which demonstrated a drop in unit sales year-over-year. Nevertheless, the demand towards high-performance and premium class graphics cards is still strong, according to Jon Peddie, the head of the market research firm.

Shipments of Desktop Graphics Adapters Drop 14% Year-on-Year, But Enthusiasts Keep Buying Expensive Graphics Cards

Back in the third quarter of 2007 there was a substantial – 26.8% – sequential increase in desktop graphics adapters (both discrete and integrated) shipments: from 56.8 million to 72 million units, which was inline with typical patterns of the market. However, in Q3 2008 shipments of desktop graphics adapters increased only 4.56% sequentially from 59.2 million to about 61.9 million and dropped 14% year-over-year, according to recently released figures by JPR.

On the other hand, if last year there was almost no increase in mobile graphics chip shipments from the second quarter (24.5 million units) to the third quarter (25.8 million), then this year we can notice 39.8% sequential increase in Q3 2008 – from 35.3 million units to 49.36 million – as well as 91% year-over-year boost.

According to the market research firm, rapid expansion of notebooks and netbooks are to blame for the weakness of desktop graphics adapters. But even though the demand towards mainstream graphics cards declined in Q3 2008, more expensive offerings became more popular than in the same period last year.

“The loss in discrete sales was primarily in mainstream add-in boards (AIBs) due to overall market expanse driven by lower cost PCs and the use of integrated graphics processors (IGPs). In the Performance segment the shipments were about the same, Enthusiast was up almost 3x, and workstation was up 1.5x,” said Jon Peddie.

Will the Launch if Intel Core i7 Catalyze More Graphics Cards Sales? Remains Unknown

Since the economic downturn only started to show up in September, the whole quarter was not significantly affected by it. But going forward it is inevitable that the markets of mobile and desktop graphics adapters will face the same challenges as the others. Still, the forthcoming launch of Intel Core i7 microprocessors can further boost adoption of expensive AIBs by performance-demanding end-users.

“The first wave of Intel Core i7 chips is going to be extremely fast and to show off that speed the OEMs will use extremely fast AIBs, and more than one in their trophy systems,” said Mr. Peddie.

Potentially, the launch if the new chips can even affect sales of mainstream graphics cards since there are no chipsets with integrated graphics for the first-gen Core i7 central processing units. Unfortunately, since many start to save on various things, including technology, amid economic downturn, it is hard to predict how the general market will behave in the fourth quarter and going forward.

“Q4 is a complete unknown at this time. Normally I would say [there will be an increase in demand for discrete graphics cards], based on historical seasonal patterns, but the financial crisis has so many people scared, and some unemployed as a result of it, companies are pulling back on some of their plans, and consumers are confused. Q4 could be flat (compared to Q3 shipments). If the financial markets stabilize (and the U.S. election may have some soothing effect on that), and black Friday isn’t too bad, the market could rebound. If it does you can to a certain extent look at AIBs and PCs as a leading indicator since most people don't need a new computer,” the head of Jon Peddie Research explained.

Tags: AMD, ATI, Nvidia, Geforce, Radeon, JPR

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