Shipments of discrete graphics processing units (GPUs) are traditionally high in the third quarter as PC makers and retailers gear up for the holiday season and build up stocks of components. Q3 2016 was particularly good for standalone GPUs because both AMD and NVIDIA introduced a number of new products for different market segments from May to August. Sales of discrete graphics cards for desktop PCs hit a two-year high in the third quarter, according to data released by Jon Peddie Research. What is important is that standalone GPUs performed very well despite a shrink of PC sales.
In the third quarter of 2016, the industry sold from 68 million (a 3.9% year-over-year decline, according to IDC) to 68.9 million of PCs (a 5.7% YoY decline according to Gartner). The numbers are up from the second quarter of 2016, but are down from the same period a year ago. A good news is that sales of gaming desktop and notebook PCs are strong, which is why shipments of standalone graphics processors were strong as well. JPR believes that around 34.84% of PCs shipped in Q3 used discrete GPUs. Based on the numbers from IDC and Gartner, we can estimate that this should be between 23.7 and 24.0 million standalone graphics chips were shipped by AMD and NVIDIA in Q3 (assuming that PCs with discrete GPUs had only one discrete card, which is not far from truth as sales of multi-GPU systems are not high in terms of volumes). Nevertheless, keep in mind that data from JPR, IDC and Gartner reflects sold-in numbers – units from distributors rather than end-user sales – which means that not all GPUs ended up in systems already purchased by the end-user.
Fueled by the release of AMD’s Radeon RX family of discrete GPUs for desktops as well as NVIDIA’s launch of its GeForce GTX 10-series line, shipments of graphics cards for desktops increased 38.16% quarter-over-quarter (QoQ) in Q3, according to Jon Peddie Research. JPR does not officially disclose how many graphics adapters for desktop PCs were sold in the third quarter, but based on the company’s previously released numbers, we can estimate that various makers of add-in boards (AIBs) sold approximately 13.04 million video cards, which is up from 11.97 million units in Q3 2015 (see notes below). It is hard to estimate how many standalone GPUs for notebooks were shipped, during the discussed period, but we may be talking about roughly 10 million units.
| Desktop Discrete Graphics Cards Market in Q3 2016 Data calculated from Jon Peddie Research News Numbers are in percentage points or in millions. Numbers are approximate. | ||||||||
| Q3 2016 (current) | Q2 2016 (previous Q) | Q3 2015 (previous Y) | ||||||
| Share | Shipments | Share | Shipments | Share | Shipments | |||
| AMD | 29.1% | ~3.80 | 29.9% | ~2.82 | 18.8% | ~2.25 | ||
| NVIDIA | 70.9% | ~9.25 | 70% | ~6.60 | 81.1% | ~9.71 | ||
| Other | 0% | 0 | 0.1% | ~0.0094 | 0% | 0 | ||
| Total | 100% | ~13.04 | 100% | ~9.44 | 100% | ~11.97 | ||
It is evident that Q3 was a good year for desktop graphics cards in general. Moreover, the whole year to date has been positive for AIBs. Various manufacturers have sold a total 34.40 million GPUs in the first three quarters, up 5.35% from a total of 32.65 million in Q1+Q2+Q3 of 2015. Analysts from Jon Peddie Research attribute increases of desktop GPU shipments to new gaming content as well as the promise of virtual reality. Since more new games are about to be released in Q4 and because VR remains a highly discussed topic in the gaming community, it is likely that shipments of desktop discrete GPUs are going to stay at high levels for a while. Nonetheless, it remains to be seen whether their sales in Q4 beat their sales in Q3 (which sometimes happens, especially in cases when supply does not meet demand in Q3).
One of the things to note is the consolidation of the PC market. The three largest PC vendors (Lenovo, HP, Dell) controlled over 58% of the worldwide market in Q3 2016, up from 55% a year ago and 51% in 2014. Such consolidation happens not only because they can negotiate better deals with their suppliers and thus offer better pricing, but also because they are gradually expanding their product families. On the one hand they add mini PCs to their lineups, and on the other they roll-out gaming PCs. For example, this year we observed HP’s return to the market of gaming desktops with the Omen X and ASUS’ release of the ROG GT51 for $ 4999. Moreover, as markets such as VR are gaining publicity, large PC vendors will try to capitalize on this and offer gaming systems with discrete GPUs. Unfortunately, we have no idea whether this is going to be a long-lasting trend.
In our overview of Q2 2016, we mentioned that shipments of higher-end graphics processors were growing, whereas sales of mainstream GPUs were declining in the recent years as a result of major improvements of AMD’s integrated graphics and Intel’s iGPUs. In particular, sales of enthusiast-class adapters hit 5.9 million units in 2015, which was a record. This year is not that good for expensive graphics cards, but shipments of gaming-grade desktop GPUs are still very high.
Sales of enthusiast-class desktop AIBs in Q3 2016 were considerably lower than sales of enthusiast-class standalone desktop GPUs in the same period a year ago. Nonetheless, we are still talking about around ~1.5 million units, which seems to be higher than what we have seen historically. Moreover, since JPR considers everything that costs between $ 250 and $ 900 as “enthusiast”, it is obvious that unit shipments do not necessarily reflect revenues earned by AMD and NVIDIA. Moreover, since AMD and NVIDIA officially sell the Radeon RX 480 and the GeForce GTX 1060 for $ 249 and demand for these products (which performance is on par with much more expensive predecessors) was probably very high during the quarter, it is likely that some of the “enthusiast” buyers were classified as “performance” ($ 249 and below) buyers in Q3 2016.
| Fall 2016 GPU Pricing Comparison | ||||||
| Market Segment | AMD | Price | NVIDIA | |||
| Enthusiast $ 250 – $ 900 | $ 1200 | TITAN X (Pascal) | ||||
| $ 599 | GeForce GTX 1080 | |||||
| $ 379 | GeForce GTX 1070 | |||||
| Performance $ 100 – $ 249 | Radeon RX 480 (8GB) | $ 249 | GeForce GTX 1060 6GB | |||
| Radeon RX 480 (4GB) | $ 229 | |||||
| Radeon RX 470 | $ 199 | GeForce GTX 1060 3GB | ||||
| $ 139 | GeForce GTX 1050 Ti | |||||
| Radeon RX 460 (4GB) | $ 119 | |||||
| Radeon RX 460 (2GB) | $ 109 | GeForce GTX 1050 | ||||
| Mainstream <$ 99 | No New GPUs | <$ 100 | No New GPUs | |||
Despite the fact that shipments of higher-end standalone video cards dropped year-over-year (YoY) in the third quarter, gaming-grade graphics adapters (enthusiast + performance) hit around seven million units. The industry still supplied over five million of mainstream boards in Q3, which is quite a lot. Nonetheless, performance and enthusiast-class desktop AIBs have been outselling mainstream graphics cards for five consecutive quarters now.
Shipments of AMD’s GPUs (both standalone and integrated) were strong in Q3 2016: sales of desktop GPUs were up 34.7% QoQ, shipments of mobile GPUs were up 23% sequentially, supplies of desktop APUs decreased by 10% from the previous quarter and sales of mobile APUs grew by 19.1% QoQ, according to Jon Peddie Research. Overall, AMD’s PC graphics shipments increase by 15.4% from the previous quarter, JPR reports.
AMD does not disclose a lot of information about its GPU shipments. However, in its recent conference call the company confirmed that its quarterly channel GPU revenue and ASP in Q3 hit record levels since early 2014 and that the Radeon RX accounted for more than 50% of its channel GPU revenue. Furthermore, AMD said that its professional GPU revenue increased for the fourth consecutive quarter.
“The launch of our expanded family of Polaris desktop GPUs and our first full quarter of RX 480 sales drove our highest quarterly channel GPU revenue and ASP since early 2014,” said Lisa Su, CEO of AMD, during the conference call with investors and financial analysts. “The Radeon RX GPUs now account for more than 50% of our channel GPU revenue.”
AMD admitted that early in Q3 it could not meet demand for its new products made using 14 nm FinFET (14LPP) process technology, but things got better later in the quarter. As PC makers roll out new systems featuring AMD’s Polaris and other chips in Q4, the company hopes to either maintain or even increase its GPU shipments this quarter.
“We are very happy with how Polaris ramped in Q3,” said Dr. Su. “The customer demand across all geographies was very strong. Q3 was primarily a channel-based quarter. […] In the early part of Q3, we actually had some supply constraints, given the customer demand, [but] we did catch up towards the end of the quarter. […] As we go into Q4, in addition to the channel partners continuing to ramp, you should expect some OEMs launching in Q4 more broadly.”
AMD’s sales of desktop discrete GPUs in total for 2016 (Q1 to Q3) have already hit 9.34 million units, which is more than 8.8 million desktop graphics processors the company shipped in 2015. It is unknown whether AMD manages to increase its desktop GPU sales in Q4 substantially over Q3 to actually beat its 2014 results (15.78 million), but it is clear that AMD’s desktop GPU business is performing better this year than it did in 2015.
From the market share point of view, it remains to be seen how well AMD will respond to challenges imposed by NVIDIA’s Pascal GPUs in the performance market segment (i.e., $ 100-$ 249). In Q3 the company had to compete against NVIDIA’s Pascal-based GeForce GTX 1070/1080 graphics cards using its products released in 2015 (Fiji) and 2013 (Hawaii). None of those chips are manufactured or supplied today, which is why we see that prices of the Radeon R9 Fury- and the Radeon R9 390-series graphics cards vary greatly (e.g., you can get a Fury X for $ 299.99 after $ 30 rebate, or you can get the same card for $ 799.95). Some of AMD’s partners attempt to get rid of older products, others believe that since there will be no more Fiji or Hawaii chips, they will be able to capitalize on short supply of AMD’s high-end GPUs in the fourth quarter. In the meantime, AMD itself is gearing up to launch its Greenland/Vega high-end GPU in 2017 and has no plans to ship more Fiji or Hawaii processors (at least in mass quantities for consumer graphics adapters).
Jon Peddie Research reports that NVIDIA shipped approximately 9.25 million desktop GPUs (up 39.8% QoQ) and increased its notebook GPU shipments by 38.7% sequentially in calendar Q3. NVIDIA does not officially disclose the number of graphics processors it sells, but the company’s revenue for gaming-grade GPUs skyrocketed to $ 1.244 billion in its Q3 FY2017 (ended October 30, 2016), so it is logical to assume that shipments of its graphics chips (both for desktops and notebooks) were very strong in the calendar third quarter as well.
“Gaming revenue crossed the $ 1 billion mark and increased 63% year-on-year to a record $ 1.24 billion, fueled by our Pascal-based GPUs,” said Colette M. Kress, CFO of NVIDIA, during the company’s earnings conference call. “Demand was strong in every geographic region across desktop and notebook, and across the full gaming audience, from GTX 1050 to the TITAN X.”
NVIDIA itself attributes its success in the third quarter to sales of its Pascal-based products — the GeForce GTX 1060, 1070 and 1080 as well as their mobile brethren. Since such boards start at $ 199 and their ASP should be considerably higher than that, it is not surprising that NVIDIA earned a lot despite a decrease in unit sales compared to Q3 in 2015. Unfortunately, we do not know exact rankings of AMD and NVIDIA in the enthusiast part of the market in terms of units, but it looks like the green company commands the lion’s share of this lucrative segment in terms of both units and dollars. Moreover, this situation is going to last for some time before AMD introduces its next-generation Greenland/Vega GPUs.
For the three-quarters so far in 2016, NVIDIA has sold approximately 25 million of desktop discrete GPUs. This is ~4% lower than in the first three quarters of 2015 (around 26 million). Nonetheless, despite slightly lower unit sales, the company is thriving financially due to higher ASPs. Moreover, NVIDIA’s management implies that demand for its desktop GPUs is still very high and sales of graphics cards may increase in Q4 as a result of improved yields and/or increased allocation at TSMC. If this happens, the company could sell around 35 million desktop GPUs in total this year, the same amount as in 2015.
“In terms of Pascal, we are still ramping,” said Jen-Hsun Huang, CEO of NVIDIA. “Production is fully ramped in the sense that all of our products are [certified and qualified with OEMs], they are on the market. However, demand is still high. So, we are going to continue to work hard, and our manufacturing partner TSMC is doing a great job for us.”
Last year AMD addressed the high-end of the market with unique products like the Radeon R9 Fury series with HBM memory, as well as the Radeon R9 Nano aimed at small form factor systems. This year the company decided to focus on mainstream video cards with its Radeon RX series (previously known as Polaris). So far, this tactic has been paying off: over the past 12 months, AMD regained over 10% of the market and increased quarterly shipments of desktop discrete GPUs by over 1.5 million units.
AMD shipped approximately 3.8 million standalone graphics chips for desktop computers in the third quarter of 2016, which is a two-year high, according to Jon Peddie Research. The company’s desktop discrete GPU sales were up nearly one million units from the previous quarter (an increase of 34%) and grew by over 1.5 million units from the same period last year (an increase of 68.8%). Meanwhile, AMD’s market share declined 0.8% from the previous quarter (Q2 2016) due to strong NVIDIA performance but surged 10% from Q3 2015.
NVIDIA also managed to increase its discrete desktop GPU shipments in the third quarter significantly. The company sold 9.25 million GPUs, up from 6.61 million in Q2 2016 (an increase of about 40%), and up from 8.97 million in Q3 2015 (an increase of 3.1%). NVIDIA typically clears out its inventory in the second quarter, hence, its sequential growth of chip sales in the third quarter is not particularly surprising. Meanwhile, the company has managed to bring its sales back to recent historical levels, which is not bad on a market that has been on a decline for years.
The industry shipped 34.4 million discrete graphics cards in the first three-quarters of 2016, an increase of 5.35% from 32.65 in the same period last year. If everything goes as planned for AMD and NVIDIA, year-over-year unit sales of graphics adapters will increase in 2016 for the first time in nearly a decade. Obviously, shipments of desktop GPUs this year will barely touch sales of GPUs even in 2014, but it could be important that shipments of graphics adapters may have bottomed out.
With 9.34 million desktop AIBs sold so far in 2016, AMD has already beaten its last year desktop GPU shipments and is on a recovery path. Nonetheless, the company still cannot win back its market share from its arch-rival: its share has dropped to 29.1% in Q3 from 29.9% in the previous quarter.
NVIDIA’s desktop GPU sales so far (from Q1 to Q3 2016) are slightly behind shipments of its AIBs in the first three-quarters of 2015 because the company decided to aggressively clear out inventory in Q2. Nonetheless, with 25 million desktop GPUs sold this year (until September 30, 2016, to be correct), the company can still supply the same amount of desktop GPUs as last year.
As reported, iGPUs are slowly eating the lunch of entry-level and mainstream graphics cards that cost below $ 99. In Q3 of 2016, the industry shipped around five million of such AIBs, whereas shipments of gaming-grade desktop GPUs were around seven million. Meanwhile, the popularity of enthusiast-class graphics hardware decreased in Q3 2016 compared to Q3 2015 mostly due to classification, rather than due to changes in the general consumer behavior (what used to be enthusiast class performance can now be had at mainstream prices, in the classification scale based on price). Those who play games are going to continue to buy gaming-grade hardware and well-developed nations are going to increase purchases of more advanced GPUs because of factors like 4K/5K resolutions, VR and others.
“I think, one, the number of gamers in the world is growing,” said Jen-Hsun Huang. “Everybody that is effectively born in the last 10-15 years [is] likely to be a gamer.”
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