IDC: PC chip sales to rise 18 percent in 2004

Revenue from PC chips will grow faster in 2004 than it did last year as corporate buyers join consumers and mobile users in pushing the market forward, according to a report released Monday from market research firm IDC.

The total revenue earned by PC chip companies in 2004 should total $53.6 billion, up 18 percent from revenue of $45.4 million in 2003, said Shane Rau, IDC’s lead analyst for PC semiconductors, based in Mountain View, California.

With revenue growth of 10.3 percent, last year was a great year for the industry, especially in the second half of the year. Rau said. This year will see another strong performance from chip companies in the second half as new products from Intel, renewed corporate purchases, and increased seasonal demand from consumers drive the market, he said.

Intel will release faster versions of its Prescott Pentium 4 processors later this year, and will also upgrade its chipset technology with the release of Grantsdale. Grantsdale will feature the PCI Express interconnect technology and support for faster memory chips.

Most consumers and corporations buy whatever technology is available when they decide they need a new PC, rather than waiting for new products, Rau said. But both of those technologies will attract some high-end PC users to purchase new systems that will be expensive and generate more revenue than the average desktop PC, he said.

Revenue from mobile chips will grow 16.1 percent in 2004, as compared to only 2.9 percent growth forecast by IDC for desktop chip revenue. All segments of the notebook market are expected to grow in 2004, while only desktops below $1,000 are expected to show significant growth, Rau said.

Corporations are also expected to replace their aging PC infrastructure over this year. The past few years have seen pleas to corporations from Intel and other PC industry companies to replace desktops purchased amid fears of the Y2K problem, and this year will finally see those companies gradually upgrade their systems, Rau said.

Despite last year’s strong growth, the PC and semiconductor markets were reminded of the seasonal nature of PC purchases last Thursday when Intel released updated revenue guidance for the first quarter.

Intel said first-quarter revenue would come in at the low-end of seasonal expectations after inventory in Asia-Pacific exceeded demand by a larger margin than was forecast coming off the strong fourth quarter. Some divisions of the company apparently thought sales in the first quarter would be approximately flat compared with the fourth quarter, when it is traditionally about 5 percent down from the fourth quarter.

“People had expected the first quarter to be unexpectedly better, much like the third and fourth quarters (of 2003) were,” Rau said. “We see a good year for 2004, but the cycle is going to follow seasonal demand.”

The third quarter of the year contains the back-to-school shopping season, while the extremely important holiday shopping season falls in the fourth quarter.

IDC, based in Framingham, Massachusetts, is a division of International Data Group, parent company of IDG News Service.