Tiburon (CA) - The graphics chip industry saw a strong second quarter with solid growth sequentially and year-over-year, according to a report released by Jon Peddie Research. Intel and ATI posted substantial gains while Nvidia's market share decreased once again.

The second quarter of the year is traditionally a slow period for the industry that shows declining sales. According to market research firm Jon Peddie Research (JPR), the graphics chip industry achieved growth both sequentially and year-over-year, which is a sign for a healthy segment that continues to do well in the market place.

Overall, JPR estimates that the eight largest graphics chip suppliers shipped 61.4 million PC graphics devices shipped from in the second quarter. This translates to a 2.0 percent increase over the previous quarter and a 12.9 percent increase over Q2 2004. Results for individual segments of the market were mixed: While the desktop graphics segment climbed 2.1 percent sequentially, the growth was driven by an 8.4 percent gain of the integrated chipset (IGP) market. The growth was offset by a 6.2 percent decline in shipments of standalone (discrete) desktop graphics chips. The mobile graphics segment saw quarterly growth of 1.8 percent with integrated mobile shipments increasing 10.3 percent sequentially, JPR said. The strong growth in the mobile IGC segment was offset by a 12.2 percent sequential decline in discrete mobile shipments.

With notebook sales at an all-time high, it's not really surprising that also graphics chips expand sales in this segment. JPR said that 14.9 million mobile chips shipped in Q2, 10 million of which were integrated chipsets - claiming a whopping 67.2 percent share of the market. ATI increased its mobile IGP shipments by 50 percent during the quarter, while Intel's aw growth of 7.4 percent.

The winners of the quarter were Intel and ATI, according to JPR. Once again, Intel profited from strong demand for IGCs that increased its unit sales by 3.5 percent and pushed its market share from 43.1 percent in Q1 to 43.7 percent in Q2. ATI saw a similar improvement: A 4.8 increase in unit numbers allowed the company to grow its market share grow from 26.1 to 26.8 percent. At least in overall sales, Nvidia came in third, with yet another loss in market share. According to JPR, Nvidia's sales contracted by 9.2 percent in Q2. The market share fell in the same time frame from 17.9 to 15.9 percent.

In the discrete desktop market, ATI's and Nvidia's traditional battlefield, ATI maintained its lead over its competitor. ATI's products achieved 52 percent market share while Nvidia's share was 46 percent.