The story behind the numbers.

By now you’ve heard from anyone who has a keyboard, how the pandemic is bolstering the gaming market. That’s true, it is. In JPR’s quarterly market report, we saw shipments of GPUs go up to an extent, which in any other time, would be surprising. Everything is different now.

Games need good, really good if not great, GPUs. Most gamers, who use a desktop machine and play at home know that, and already have one, but some have been waiting or planning to upgrade. When they were told they had to stay home, the time they spent gaming went up significantly. Maybe they bought newer games. And so, we’re seeing a demand for better systems.  In addition, some people who have been curious about, or maybe even casually tried gaming, and got more involved. They too made some purchases, and have expanded the market size of gaming.

It’s not just the gamers, either; professional users are investing in graphics. The first wave of pro users went for laptop upgrades and companies emptied out the shelves of retailers to get their workforce setup at home. As the periods of lockdown have stretched out, there has been a second wave of investment as professionals found they needed bigger screens and machines, more like what they had at work. They started buying or submitting requests to management.

Management, intrigued by the cost savings of having people work at home began considering, if not mandating that this was the new normal and henceforth, we would continue to work at home. That enlightenment was driven by increased productivity with the elimination of commute time and also the cost savings of reduced need for leased facilities. A good PC or workstation is turning out to be a really cheap alternative for businesses and in those new machines lurked new GPUs.

We found that while CPU shipments went up from last year by 4.6%, GPU shipments went up 11.2%. Expressed another way, the attach rate went up from 14% this quarter last year to 22% this quarter, as depicted in the following chart.

The big question is will the PC market continue to expand, reversing a trend of decline for the past decade? Based on CPU shipments the answer is yes.

What marks the tie-in to the pandemic is the break in the traditional seasonality of shipments. Shipments in Q2 have been negative from quarter-to-quarter an average of -1.5% for the past 10 years and dipping to as low as -11% in 2017 and 2018. This year the quarter-to-quarter change was a positive 2.5%.

Our reports are supply-side, chips coming out of the factory. As such they are a leading indicator of what PCs and add-in board shipments may be like within a month or two. So the indications are PC shipments will increase in Q3.

But will the demand for PCs continue? Was the increase in PC sales in Q2 new business due to work at home, or cannibalization of future business due to a temporary demand spike? So far indications from the supply chain, sales in Q3 will be brisk. The average forecast of semiconductor suppliers AMD, Intel, and Nidia for Q3 is 12% over Q2.

So the new normal may be the continuation of working at home, along with the side benefit of less pollution due to reduced commuting, and strong demand for PCs for next few quarters. It all sounds good to me.