The market for PC chipsets appears to be robust for the next five years. But significant shifts are under way that will determine the types and variety of mobile computers and desktop PCs that will be available to business customers. The changes also underscore the different approaches processor rivals Intel and Advanced Micro Devices Inc. are taking.
Intel has engaged in a strategy of "platformization" over the past year, which is likely to result in it pulling chips and embedded software functionality into its own multibillion-dollar chipset business, functions that previously were completed by third-party suppliers. That strategy could provide business customers with more-complete off-the-shelf systems from Intel but limit the number of alternatives from third-party suppliers.
AMD only recently entered the platform market, having introduced its Turion mobile PC line earlier this year. But AMD plans to continue to rely heavily on independent suppliers to provide much of the functionality that will go alongside its processors.
The PC chipset market is expected to grow from about $7 billion this year to more than $10 billion in 2009, according to a recent In-Stat study. As that growth occurs, the ecosystem surrounding Intel-based PCs is expected to shrink as Intel itself adds more of those third-party-supplied functions. At the same time, third-party support for AMD processor-based systems will grow.
"It's pretty clear from Intel that they want to build their own elements to put around their processors," says Chris Kissel, an In-Stat analyst. Intel's chipset business, which trails only its processor business in revenue, represents as much as half of the total PC chipset market, he says. That percentage could rise if Intel's platform approach proves successful.
One of those third-party suppliers is ATI Technologies Inc., which makes 3-D graphics chips. Around 80% of PCs using Intel processors also use graphics-processing technology from the company, leaving only 20% of the market to third-party suppliers like ATI. Over the past two years, ATI has seen a similar-size market emerge to support PCs with AMD processors, says Phil Eisler, general manager of ATI's integrated graphics business unit. "AMD has embraced the third-party chipset people, and I don't think they have plans for their own competing products," he says.
Intel has been expanding its own offerings since the success of its Centrino platform, which includes Intel's Pentium M processors, an 802.11 wireless LAN chip, and graphics media accelerator. The company would like to re-create the magic with desktop systems, and earlier this year it introduced the Professional Business Platform as well as the Digital Home Platform. Those platforms utilize an Intel chipset that includes a processor, graphics, and audio support, and adds active management technology, one of several "embedded IT" functions that Intel will use in the years ahead to either enhance or replace third-party functions in areas such as system monitoring and virtualization.
"If these new platforms are successful, some of the things that require a unique Intel capability will pull through greater silicon content for the company," says Steve Peterson, Intel's chipset and software marketing director.
But as dynamics in the market change, such as many PC manufacturers outsourcing engineering capabilities, Intel has had to take on more of the burden in designing systems, Peterson says.
That doesn't make third-party suppliers happy. As Intel's chipset business grows and the company increases the functions it provides to PC makers, don't be surprised to see more third-party developers shift their focus from Intel-based to AMD-based systems.