Chip market shows signs of life

The analyst firm Future Horizons has suggested the chip market could be about to break a key psychological barrier, after last year's 'severe overreaction' to financial uncertainty
Written by David Meyer, Contributor

Sales growth in the chip market over the second quarter of this year could point to a sustained recovery, the research firm Future Horizons has said.

According to the analysts, sales grew 0.9 percent month-on-month in May. April saw 16 percent month-on-month growth, but the continuation of growth in May means June is "on track to break through the $20bn [£12.4bn] barrier, for the first time since the chip market collapsed last September".

"Psychologically this will give everyone a shot in the arm", Malcolm Penn, the chairman and chief executive of Future Horizons, said in a statement on Monday. "Second quarter growth is usually pretty pathetic — there have been only three historical precedents when such a spurt has happened."

Penn said the collapse in the fourth quarter of last year was "far too steep [and] a severe overreaction to last year's gross financial uncertainty". He said the market was now in a correction phase to rebalance over-depleted inventories, adding that the timing of the recovery was "as good as it gets", due to seasonal demand in the third quarter.

In another piece of analysis released on Monday, the technology tracking firm Context said PC sales through distributors in seven of Europe's leading economies were flat in the second quarter of this year, compared with the second quarter of 2008.

Context said in a statement that the quarterly total was affected by a "record slump" in June, which showed an 11.5 percent year-on-year drop in distributor sales of desktops, notebooks and servers, according to preliminary findings.

Notebook PC sales fell for the first time in June by 5.1 percent, according to Context. The company said traditional notebook sales saw the steepest decline, at 23.7 percent. Netbook sales were still growing, albeit more slowly than in earlier months this year.

Netbooks now account for around a quarter of all notebook sales, Context said.

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