Demand appears to be stronger than expected for Intel's Atom chip and the netbooks that they power, according to a Citi report.
In a research note, analyst Glen Yeung said:
Field checks from Japan suggest Intel has ordered 20M Atom flip-chip packages for 3Q08 and 25M for 4Q08. This is orders of magnitude more than our modeled 2M and 2.5M units in that timeframe. These figures do sound aggressive to us (and some is likely inventory build) and so we believe a substantive haircut is appropriate. Nonetheless, even at half these levels, Atom is running well ahead of our expectations.
On Intel's second quarter earnings conference call, the company was optimistic about Atom's prospects and CEO Paul Otellini touted the Netbook/mobile Internet device markets. At the time, it was a little unclear how demand would turn out. Yeung noted that "netbook demand has been surprisingly strong" as Dell, Lenovo, Asus and Acer all roll out devices.
Yeung also reports that Intel will launch a desktop Atom processor in the third quarter that should further boost units. And embedded Atom platform--dubbed Navy Pier--should follow.
There are a couple wildcards here. Yeung says demand is strong, but he's basing that conclusion on OEMs that are launching netbooks. The bigger question is whether consumers will follow through. And it's also unclear what Intel chips Atom will cannibalize--most likely Celeron, which has lower profit margins anyway.
In the netbook/chip battle, Intel has a mostly open field right now with Atom. AMD isn't playing in the netbook market and Intel's only competition is Via. However, Via shouldn't be written off. J.P. Morgan analyst Christopher Danely said in a research note that Intel's share at PC manufacturers may have slipped due to HP's decision to build more systems with AMD and Via. Danely's model excludes the channel so I'd take it with a grain of salt. The big takeaway is that Via is showing up as a viable competitor these days. I'll have to bone up on Via. It's a blast from the past, but haven't tracked them much lately.