Solid Mobile Phone: Graphics Cards Add-In-Boards Market Killed i

The market for graphics add-in boards (AIBs) proved anything but
impervious to the downward pull of fourth quarter's economic collapse,
according to a new report from market analysts at Jon Peddie Research
(JPR). Markets in every corner of the economy - and every corner of
the globe - contracted, and the AIB market was no exception. But
that's really an understatement, as the AIB market took a
substantially bigger beating than the closely related markets for PCs
and workstations, as OEMs and the channel curtailed new orders and ran
down inventories.

If there were many holiday buyers out shopping for a game card among
the several new high-performance price-competitive offerings from
market leaders Nvidia and AMD, well the results didn't show it. The
grim numbers for the quarter read as follows: 15.2 million units
shipped, representing a 42.7% decline (year-over-year), accounting for
$2.5 billion in revenue, reflecting a similar 43.8% decline in
revenue.

Desktop AIB market results

Table 14 AIB market value history, by quarter

One bright spot: AIBs fending off IGPs in a downturn

Considering that the majority of graphics cards ship to customers in
systems from PC and workstation OEMs, the AIB market's ugly drop
raised an interesting question: why were AIBs down 43%, when PCs and
workstations were down more in the neighborhood of 10%? Was it more
evidence of the inroads made by chipset-integrated graphics processors
(IGPs), stealing away potential AIB customers? Not so, reports JPR.

Tapping inventories exaggerate losses

Rather than blaming further IGP encroachment for the exaggerated
quarterly decline in AIB shipments, Jon Peddie Research points instead
to the reliance of OEMs and the channel on existing inventories. In
any industry where deep inventories can act as a buffer between supply
and demand, the extent of the impact during a downturn is likely to be
more pronounced.

Deeper inventories are a safety valve, making it a lot easier for
buyers to stop buying - at least for the short term - while allowing
them some time to sort out the situation and determine how to properly
adjust orders to meet the new, lower run-rate. Drain down inventory
for a bit to keep orders filled near term, and build it back up later
when the coast is clear. Such appears to be the case for graphics AIBs
in Q4'08, taking what might have been just a poor quarter and turning
it downright ugly.