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Computer chip sales cool down in summer

Hurt by weaker demand, both sales and shipments of microprocessors for the third quarter rose much less than usual for the period, according to the latest data from IDC.

Sluggish demand took a bite out of chip sales and shipments toward the end of the summer, says a new study out today from research firm IDC.

For the third quarter, worldwide microprocessor sales rose only 2.5 percent from the second quarter, while shipments inched up just 2.1 percent from the prior quarter. On a year-over-year basis, results were healthier, with chip sales rising 24.1 percent and shipments 8.6 percent over the third quarter of 2009.

Typically, global chip sales jump around 9 percent from the second to the third quarter, while shipments increase 10.6 percent. This year's lackluster growth was unusual, according to IDC, and triggered by weaker demand that affected the entire supply chain.

"Market demand for processors was weak in July and in August," Shane Rau director of Semiconductors: Personal Computing research at IDC, said in a statement. "OEMs (original equipment manufacturers) have become very reactive to any hint of slackening end demand. And, when they cut their PC build orders, like they did in late 2Q10 and the first half of 3Q10, not only did they cut their processor orders, they caused their contract manufacturers to cut orders for commodity components. The whole supply chain is skittish."

Drilling down into the chip market for the third quarter, shipments of mobile PC processors edged up just 1.6 percent over the second quarter, server processors rose 4.1 percent, and desktop processors advanced 2.4 percent. But again, year-over-year growth was stronger, at least for two segments.

Shipments of mobile PC chips rose 13.3 percent from the third quarter of 2009, while those of server processors jumped 24.4 percent. But shipments of desktop chips grew just 1.7 percent from a year ago.

Among the major chip players, Intel took home an 80.4 percent chunk of the market, a loss of 0.3 of a percentage point from the second quarter, while AMD earned a 19.2 percent share, up 0.2 of a percentage point from the prior quarter. Overall growth for the second half of 2010 is expected to be sluggish compared with the first half, but the chip market should revive next year.

"For 2011, we believe that, even though the consumer segment will remain stalled in developed regions, IT executives will see PC upgrades as a priority over the next 12 months, which should result in double-digit growth in PC systems and PC processors units next year," Rau said.