AMD gains ground on Intel

NEWS

PC chipmaker Advanced Micro Devices gained ground in its rivalry with chip king Intel during 2001, despite a surge by Intel in the fourth quarter. AMD gained nearly four points of market share against its rival to end the year with just more than 20 percent of the PC processor market, despite losing two points sequentially from the third quarter, according to new numbers released by Mercury Research this week. For the year, Intel finished 2001 with 78.7 percent of the market, down from 82.2 percent during 2000, ceding 3.5 points of share to AMD, which grew its share from 16.7 percent in 2000 to 20.2 percent in 2001, Mercury said. Still, strong demand in the fourth quarter helped Intel begin to alter the market's momentum to a certain degree. Unlike the previous three quarters, the fourth quarter of 2001 saw record shipments of PC processors and greater revenues thanks to strong holiday PC sales, especially of high-end desktops and notebooks. Intel's share is about a half a point higher if the chips sold to Microsoft for the Xbox are included. As a result, Intel claimed 80.6 percent of the PC market during the quarter, jumping two points from its third-quarter, 78.6 percent share. AMD, on the other hand, slid two points from 20.5 percent in the third quarter to 18.5 percent in the fourth quarter, according to Mercury. The small "other" category, occupied by Via Technologies and Transmeta, remained constant at 1.1 percent of the market in 2001 and 2000. After a miserable year, the fourth quarter ultimately spelled good news for both chipmakers, said Dean McCarron, principle at Mercury Research and keeper of the numbers. AMD gave up its two points of share, but the losses occurred in the budget segment of the market. The company managed to ship more Athlon chips than budget Durons, a switch from earlier quarters in 2001. "I wouldn't react too strongly to the shifts in share, because... what AMD basically did was trade shipping more units for shipping units at a higher price," McCarron said. "From a business perspective, what AMD did made a lot more sense...than trying to ship additional units." As a result, AMD's average selling price for its chips bounded from just above $70 in the third quarter to $90 in the fourth quarter. Still, the company lost money in the fourth quarter and won't likely see a profit until the second quarter of 2002, according to AMD. Meanwhile, Intel shipped more Pentium 4 and Celeron chips than expected. Pentium 4 unit shipments more than doubled during the quarter, to about 15 million. Including Pentium III sales related to Microsoft's Xbox game console, Intel garnered 81.2 percent of the PC chip market in the fourth quarter, with AMD taking 18 percent. However, Xbox was a relatively small contributor in terms of additional units. Both companies competed for the Xbox contract, which Microsoft awarded to Intel at the last minute. "Most of the unit increase came from Pentium 4, though there was some increase from Celeron," McCarron said. When it comes to the first quarter, Intel has its work cut out for it. The company needs to maintain the volume of shipments and work to increase its average selling price. "Now what Intel has to do is solve its pricing issue," McCarron said. Better pricing, of course, would also help AMD come back into profitability. "I'm expecting it to be a down quarter, but not in a bad way," McCarron said. "All of the evidence in the market has been that we are moving back into a normal seasonality pattern. What it looks like is we've finally got a normal year for a change."

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