While the third quarter of 2019 has been a mixed blessing for many electronic companies, two of the largest names in the industry—Intel and AMD—not only met guidance but are projecting strong year-end quarters. For these companies, the relative strengths of the markets they serve, along with well-timed product development, have enabled them to weather the volatility of the semiconductor market, according to Vlad Galabov, principal analyst for Data Center Compute and Cloud and Data Center Research Practice at IHS Markit.
In a recent e-mail interview with FierceElectronics, Galabov said improving conditions in the data center sector contributed to a strong third quarter. “The data center computing industry went through two quarters of unused server inventory consumption at large cloud service providers, which significantly impacted shipments. We always expected a recovery in 3Q19, and preliminary data suggests that 3Q19 came at our forecast, with single digit growth in server shipments year-on-year.“
Galabov added, “Additionally, to cloud service provider inventory consumption actions we saw challenging macros which impacted enterprises. We know that some governments changed their policy in 2Q19, mainly increased stimulus in China, and those took some time to be reflected in positive server shipments. We don’t have all the data per country for 3Q19 yet, but I expect to see some recovery in mainland China based on the fiscal stimulus positively impacting the enterprise market segment. “
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Another key sector for Intel and AMD processors, the client computing market, has also proved to be resilient. “This should not surprise us—enterprises will always need PCs,” said Galabov. “Additionally, the consumer market is favorably impacted by PC gaming and content creators continuing to opt for more powerful processors. The less-than-expected decline in PC shipments, coupled with CPU mix moving to the higher end due to end-users opting to run more powerful applications (like PC games and processor-intensive content creation applications like Photoshop and video editing software) has had a positive impact on Intel and AMD’s revenue.”
One contributing factor to the electronics industry slump was weakness in the memory sector, which may have impacted memory-intensive suppliers such as Micron and Samsung, but did not impact Intel and AMD. “It is clear that Intel is gaining share in the SSD and memory industry with their non-volatile solutions group (NSG) posting really good growth,” Galabov noted. “Both Intel and AMD have also seen their embedded processor business stay pretty steady.”
While Intel has a clear edge in the processor market, AMD may be creeping up on Intel, at least in the data center and client computing markets, Galabov noted. “I believe AMD has gained share in data center and client computing markets. The share gain is not dramatic when analyzed on a quarterly basis as the industry moves comparatively slowly when switching between CPU suppliers, but certainly 0.5%-1% share movement from Intel to AMD every quarter has been visible during the last year, including in 3Q19.”
During the third quarter, AMD reported strong sales of its newer Ryzen and EPYC processors designed for multiple enterprise, cloud, and high performance computing workloads.
While the near future looks bright for both companies, there’s no doubt other suppliers are also vying for a share of the markets they compete in. “Although the processor space remains the domain of Intel and AMD, competition from Arm-based CPU vendors could increase,” said Galabov. “The increasing efforts of Arm and Arm-based CPU vendors to enter the data center and client computing hardware is another risk for Intel and AMD. We already project Arm-based CPUs to be in 4% of servers by 2023, up from 0% a couple of years ago.”
The most noteworthy competitors include NVIDIA and Xilinx, but Galabov noted that start-ups like Graphcore, Cambricon and Neuroblade are also vying for a slice of the co-processor market pie. He added that additional competition could come from companies strong in the smartphone and tablet space.