October 2000 Industry Update

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Market Conditions

NOTE: After receiving some questions on the outlook for AMD, a few paragraphs of this article have been reworded for clarification. The specific changes have been documented in the News section, under the Oct 11, 3:19pm entry… I apologize for any inconvenience caused

The theme this month is the health of the PC market. By all accounts, sales of PCs and components were very disappointing in September. This has been particularly difficult for vendors after an unusually slow July and August.

Reports from industry sources indicate that ASUS, Gigabyte, MSI and AOpen had a very poor September, with at least one company reportedly having sales 30% below expectations. FIC, however, indicated that September sales were about in line with their expectations and that they believe that October will be good, and there are some reports of strength in Q4 for the others as well.

A check with some systems and component resellers has shown a similar trend for August and September, with some reports of encouraging (though spotty) sales activities for the first week of October. Vendors selling into the DIY market said that Intel and AMD processors are selling ‘about the same’, but that Intel processors are more readily available. This would seem to indicate that Intel has a bit more inventory on hand than AMD. Though there have been some concerns expressed about ‘channel stuffing’ by AMD to make their shipment numbers, these comments would tend to contradict that.

DRAM memory seems to have been hit hard as well, with at least one reseller indicating that memory sales all but stopped in September. Spot prices reflect this, with 64Mb PC133 chips dropping under $6.00 recently, and 128Mb chips at under $13.00.

Intel has already warned that Q3 revenues will be lower than expected, primarily due to a European shortfall. Part of this is because of an unfavorable conversion rate, but a number of sources are indicating that a fair percentage of the European market has gone to AMD with steady sales of Athlon and Duron processors. In addition, one source claimed that AMD may reduce their shipment numbers for K7 processors from 7.2 million to about 5.5 million due to an overall softening in demand.

The overall PC market seems to have been hit, though servers and notebooks appear to be helping to prop up sales a bit. Most sales appear to be going to Tier 1 manufacturers, and I’ve heard few comments that several of the smaller manufacturers are close to closing their doors.

While the European market has been blamed for much of the revenue shortfalls this quarter, there may be additional factors involved in the PC market. Some are speculating that the market is saturated, with no ‘killer app’ appearing to drive sales, however that has been blamed for slowdowns in the past, too. One factor that seems to be overlooked is that no company, including Intel, has provided the clear direction necessary to provide businesses and end users with a compelling reason to upgrade. With Intel processor and chipset delays and cancellations, AMD’s limited production capabilities, VIA chipset stability concerns, DRDRAM failing to live up to its promise and DDR failing to make it’s debut – it is no wonder people prefer to wait rather than buy.

The hope is that when Pentium 4/DRDRAM and Athlon/DDR based systems, with their improved memory throughput, become widely available, we will see renewed buying interest in the PC marketplace. In addition, most of the larger manufacturers are looking towards Internet-access products to be a quickly growing market starting next year, with several already debuting products.

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