PC Buying Is Expected To Fuel Chip DemandPC Buying Is Expected To Fuel Chip Demand

The market for semiconductors is forecast to grow 11% this year as companies start buying new PCs again, continuing a chip-sector recovery from the crash of 2001.

Market researcher Gartner Dataquest last week said it expects worldwide semiconductor sales this year of $173.2 billion, up from $155.8 billion last year. Revenue from microprocessors--chiefly the Intel and Advanced Micro Devices chips that power PCs and servers--are expected to rise nearly 8%, to $40.8 billion. Gartner says early signs of stronger PC buying by companies have combined with strong demand for cell phones and consumer electronics to help the chip industry make some gains from 2001, when revenue tumbled 33%.

"The fleet of PCs in most corporations is fairly aging," raising maintenance costs, says Richard Gordon, a Gartner analyst. "A lot of these pre-Y2K PCs are getting to the end of their life."

In Taiwan last week, Intel CEO Craig Barrett said the company is buying a "substantial" number of new PCs and that Intel sees other examples of this. But Barrett said he needed more evidence before proclaiming a recovery.

Other American chip vendors reported mixed news last week. IBM cut 600 jobs in its semiconductor business, which lost money in the second quarter on weak demand and unexpectedly low yields from the company's advanced East Fishkill, N.Y., plant. IBM's technology group--primarily its chip business--lost $111 million during the second quarter. Apple Computer, an IBM customer, last week introduced its first 64-bit Macintosh computers, using IBM G5 chips made in East Fishkill.

Shares of AMD rose last week on an investor's comments that Sun Microsystems may use AMD's 64-bit Opteron processor in its servers. In August, Sun said it would ship a version of its Java 2 Standard Edition software that supports the new AMD chip, which competes with Intel's Itanium processors. A Sun spokeswoman says the company has no plans to use Opteron in current products, but is evaluating it for future products in the entry-level market. AMD is due to launch a 64-bit processor for PCs on Sept. 23.