Sometimes even a stalemate qualifies for a hearty toast. So, cheers to microprocessor rivals Advanced Micro Devices Inc. (AMD) (NYSE: AMD) and Intel Corp. (Nasdaq: INTC) for not yielding much ground in their battle for market share during the third quarter.
Sales of microprocessors surged 23 percent on a year-over-year basis in the quarter, but neither of the two biggest suppliers budged much, with both No. 1 global supplier Intel and closest rival AMD holding tightly to their market shares, according to research firm iSuppli Corp. The researcher said Intel "accounted for 80.1 percent of global revenue for microprocessors, up a slight 0.1 of a percentage point from the year-ago figure of 80.0 percent share, but was down 0.3 of a percentage point sequentially from 80.4 percent in the second quarter." iSuppli added:
AMD lost market share on both sequential and year-over comparisons, but the decrease amounted to less than 1 percentage point. The company accounted for 11.3 percent of worldwide microprocessor revenue during the period, down from 11.5 percent in the second quarter and down from 12.1 percent in the third quarter a year ago.
This is not trivial news. A major gain or loss in microprocessor market share during a particular quarter has significant implications for the two leading suppliers and is subject to extensive interpretations by market watchers, analysts, investors, EMS and OEM companies, and nerdy consumers. It may also have boomerang effects for future demand and supply agreements with the potential to hurt or pump up margins.
Let me explain. Loss of face, which is what share decline amounts to, is as important to AMD's and Intel's management as the strength of their products. Why? Market share gain or loss tell a lot about the product offering, the strength of manufacturing processes, customer adoption -- current and future -- of products, and where a supplier is in the introduction of next-generation technologies and processes.
Also, in PC procurement circles, OEM supply chain executives have been known to switch suppliers in a heartbeat in response to shorter design cycles. In this environment, even the slightest advantage offered by a supplier, such as shorter delivery time, faster and more powerful chipsets, or, of course, cheaper and yet comparable parts, can deliver great savings and margin improvement to the OEM. The perception therefore that one of the two major MPU suppliers could be weaker than the other could intensify pressure on that vendor to offer price concessions it might not have otherwise considered.
“In reality, the share changes in the third quarter from the two incumbents were extremely small and not at all significant,” says Matthew Wilkins, principal analyst for computer platforms at iSuppli. “What is significant, however, is that neither company has been able to take any sizeable share away from the other. One reason is that each company offers well matched competitive product portfolios. Another reason is that end markets are not undergoing significant changes in market share of product lineup that would impact microprocessor market share.”
iSuppli warned that sometime over the next few months the market could see some dramatic share change as AMD debuts its "Fusion" products, which could see strong uptake at OEMs. Still, my view is that any dent on Intel will be slight and probably quickly erased.
One can understand and empathize with AMD -- a one percentage point decline in market share spells major trouble -- but for Intel, which controls four-fifths of the market, to scurry around for the tiniest sale may seem unseemly. That is, until you realize a one percentage point loss could easily snowball into two or more, creating the image of a lead-footed giant. Let the race go on.