Integrated GPUs
Both AMD and NVIDIA gained share in the notebook IGP segment, presumably because AMD's own CPUs also managed to capture 19.4% of the market in Q4, compared to 16.8% in Q3. Considering neither company currently has any significant market share in Intel notebooks, this implies that AMD is now the leading provider of notebook chipsets for its own CPUs. NVIDIA seems to be catching up, though, possibly thanks to the very low cost of its single-chip C61 IGP offerings, but AMD does have a bundling advantage there.
The picture is quite different on the desktop side of things, however. NVIDIA has the lead there, while AMD is trying to catch up - so it's the opposite situation of what we're seeing in the notebook market in Q4. In the last 18 months or so, NVIDIA rapidly became the leading provider of IGPs for AMD's desktop CPUs, while ATI gained a favorable position in the Intel market only to lose it again when the merger with AMD was announced in July.
Once again, neither company has a real grip on the Intel IGP market; NVIDIA because they haven't entered it yet, and AMD because they lost most of it following the ATI acquisition. It will be interesting to see if they can imitate their previous success now that they are focusing exclusively on the AMD platform, and whether NVIDIA can capture the Intel IGP market share AMD left behind when they announce their first Intel IGP, sometime in 1H07.
Conclusion
We've looked at the various industry segments, and it looks like there was plenty to take into consideration to explain the market share movements this quarter. Furthermore, the fabled Vista Effect has finally made an appearance this quarter, although possibly not in the same way many were expecting it.
Overall desktop sales were down in a seasonally strong quarter, possibly because some consumers decided to delay their purchase decisions to Q107 because of Vista's release in January. At the same time, however, OEMs are adding discrete GPUs in segments where the IGPs have significantly insufficient performance for Vista Premium. One example of that is Intel's Centrino platform, and NVIDIA is currently benefiting quite a bit from this dynamic.
On the other hand, it doesn't look like OEMs are really going to increase their share of discrete GPUs in the mid/long-term, and it is highly questionable whether they even plan to do so in the short-term, given how many "Good Enough for Vista" IGP products are already available on the market. In fact, even video decoding acceleration is getting quite good on IGPs, so with both of these factors out of the picture, discrete GPUs don't have any good selling points left if the customer doesn't care about 3D Graphics. One possibility is non-game applications taking advantage of Aero in more creative and performance-hungry ways, but there is no indication of this coming just yet, and it remains to be seen if it'll pick up all that much, and if it'll be that intensive.
The only thing that could drastically change this trend is if it turned out that end-users actually want higher-end graphics offerings in their PCs from now on. If they favored the product offerings with higher-end graphics more than they did with Windows XP, this could clearly trigger a feedback mechanism that would entice OEMs to reduce their proportion of integrated graphics-based PCs, at least in the mid-term. This is probably already happening up to a certain extend, but it remains to be seen if the effect will be sufficient to make any real impact on AMD's and NVIDIA's bottom lines.
The message to take home here is that while there will certainly be at least a slight boost in sales for the IHVs in 1H07 thanks to Vista, there is absolutely no guarantee of Vista making any significant impact on the penetration of discrete GPUs going forward. Rather, it's something these two companies' marketing departments will have to fight for, and only the future will tell us how successfully they have done so.
