Chip shipments could face slow growth

Growth in processor shipments could slow down in the fourth quarter and through 2009, inhibited by a reduced demand for chips and the global economic downturn, IDC said on Monday.

Despite healthy growth in processor shipments during the third quarter, there is an under-demand for chips, with customers cutting orders from foundries that manufacture the chips, said Shane Rau, research director at IDC.

This dovetails what chip makers like Intel have said during recent earnings calls, hinting at a slowdown in chip demand, he said.

Shipments of PC processors grew 15.8 percent year-over-year during the third quarter of 2008, according to a study released by IDC on Monday. PC processor shipments during the quarter were in the "middle-to-high 80 millions," Rau said, with shipments of mobile processors exceeding desktop PC processors for the first time.

Mobile processors totaled around 50 percent of all shipments, compared to 46 percent for desktop processors. Intel-based x86 server processors -- like Intel's Xeon and Advanced Micro Devices' Opteron -- formed around 4 percent of the shipments.

Intel was the world's leading chip supplier in the third quarter, holding 80.8 percent market share, a 1.1 percent year-over-year increase, followed by AMD, which dropped 1.2 percent to 18.5 percent.

Intel's low-cost Atom processor witnessed healthy shipments in the third quarter, totaling around 5 million units, Rau said. Atom chips are targeted at netbooks, low-cost laptops designed to run basic applications for Web surfing and e-mail.

Atom shipments will continue to witness healthy growth through the economic slowdown, Rau said. Netbooks are affordable, making them attractive as primary PCs, especially in developing countries. They also can be used as secondary PCs, and some PC makers are also bundling netbooks as part of subscriptions, such as to Internet services, especially in Europe, Rau said.

Because it is new, it's too early to determine if Atom - as its own emerging market force -- will put pressure on the prices and costs of higher-end processors, Rau said. Growth for overall chip shipments will gain steam when the worldwide economy stabilizes, which should be in 2010, Rau said.

Until then consumers may find good deals on better-configured PCs, Rau said. With the memory market in the tank and possible price pressure on chips because of the economic climate, PC prices could fall. Those willing to spend cash will likely get a better deal from PC makers willing to compete for that cash.

However, consumers will still need to be able to put down money to get deals.

"People need to be comfortable to put food on the table ... before turning back to say 'oh I can buy a PC,'" Rau said.

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