Tablets Dampen PC Graphics Chip SalesTablets Dampen PC Graphics Chip Sales

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Shipments of graphics processors last year fell below expectations, as people opted to buy the Apple iPad and postpone replacing personal computers, a research firm says.

Manufacturers shipped 432.2 million graphics chips last year, an "unimpressive" 4.3% more than in 2009, Jon Peddie Research reported Monday. The fourth quarter failed to provide the traditional seasonal kick, as sales were flat year-to-year and fell 2.6% from the third quarter.

The reason for the disappointing graphics sales was the projected growth in PC sales that never materialized. Analysts had predicted worldwide growth of 15% to 17% in 2010, while the actual percentage was less. IDC reported this month that PC shipments rose 13.6% last year, with the fourth quarter rising only a modest 2.7% year-to-year.

IDC said competition from the Apple iPad, which accounted for the majority of tablet sales last year, dampened growth in PC sales. Jon Peddie, analyst and founder of Peddie Research, says the iPad likely caused people to delay upgrading their older PCs.

"There is an impact (from tablets), it's hard to measure, but it's not cannibalization," Peddie says. "It's postponement."

Peddie says he's optimistic PC sales will pick up later this year, which will also drive growth in the graphics market. The reason he believes there will be an upswing is the fact that the iPad and other tablets have limited functionality and are not meant to replace the PC. Therefore, people will have to replace their older systems eventually.

Intel continued to lead the graphics market in the fourth quarter, accounting for 52.5% of the more than 113 million chips that shipped in the quarter. Advanced Micro Devices and Nvidia were second and third, with shares of 24.2% and 22.5%, respectively.

Intel shipments fell 7.3% when compared to the third quarter, as AMD and Nvidia increased shipments quarter-to-quarter by 2.3% and 4.1%, respectively, the research firm said. Year over year, AMD was the biggest winner in the quarter, increasing graphic shipments 11.2%, while Intel was up only 2.9% and Nvidia was down 15.1%.

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