Intel's Atom boosts chip market, but tough times loom

Chip shipments got a hefty boost from sales of the Atom processor.

Intel's new Atom processor helped drive the worldwide microprocessor market to a new shipment record in the third quarter, Nonetheless, analysts say darker times loom ahead.

International Data Corp (IDC) this week released a report showing that third quarter PC chip shipments grew 14 percent compared to the second quarter, and 15.8 percent compared to the same quarter in 2007. Chip sales rose by 4.1 percent year-over-year to hit US$8.3 billion in the third quarter.

Chip shipments got a hefty boost from sales of the Atom processor, which helped the business overcome a turbulent worldwide economy, according to the IDC report. Global shipments for the new processor, which is geared toward ultra-portable, or netbook computers, grew by 8.3 percent from the second to the third quarter.

"Not considering the effects of Atom, the overall market still grew at a decent pace in [the third quarter]," said Shane Rau, director of semiconductors and personal computing research at IDC, in a statement. "Intel's and AMD's shipments grew at a rate only slightly slower than typical for a third quarter; seasonal demand appeared reasonable up until September. By segment, while the mobile processor segment grew aggressively, the server segment was soft."

It makes sense that shipments of chips for netbooks are strong as the category has been the one recent bright spot in the PC business.

A few weeks ago, Gartner said that its research found that sales of netbook systems have been bolstering what would otherwise be a soft PC industry. With a strong push from the slew of new mini-notebooks hitting the market, worldwide PC shipments reached 80.6 million units in the third quarter, up 15% from the third quarter of 2007.

Netbooks are relatively inexpensive, small-form-factor notebooks designed for basic applications, such as Web surfing, e-mailing and word processing. They're designed to use less power than traditional PCs and laptops and aren't robust enough for serious power users or gamers.

Just last week, Hewlett-Packard, Lenovo Group, and Dell all unveiled new netbook computers.

HP introduced three new ultraportable systems, including two that carry price tags of less than $400. All three new Mini systems run Intel Corp.'s Atom processor.

For its part, Lenovo announced a low-cost netbook for the education market. The IdeaPad S10e netbook is designed for students from kindergarten through college. Weighing less than 3 pounds, the netbook runs Windows XP Home or SUSE Linux Enterprise Desktop from Novell.

And Dell unveiled the Inspiron Mini 12 netbook, a more powerful version of its Inspiron Mini 9 system. The new system is now shipping in Japan and is slated to launch globally next month with a starting price below $600.

Despite the strong third quarter numbers, IDC predicts that tougher time are ahead.

"The worldwide demand environment looks weak, and both Intel and AMD indicated an uncertain outlook for the market," the report noted. "As a result, IDC is conservative about 2009 and will be lowering its upcoming unit forecast for the year."

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