Graphics Chips Are A Sign PC Industry Expects A Big Fourth Quarter


Expectations may be getting ahead of themselves for the personal computer industry.

The business took it on the chin in the first quarter with sales tumbling . But if graphics chips are a sign, manufacturers are expecting a substantial upswing during the year-end holiday and back-to-school seasons.

This optimism may be jumping the gun. Economic signals have been improving modestly in the past month or so. But the spring back in the economy is hardly impressive and remains unsteady to boot.

So could this upbeat assessment end in disaster, with huge inventories of unsold computers clogging to wheels of business come January? It is certainly possible. Let’s hope the H-Ps and Dells have more than faith underlying their business plans.

The glimpse into the PC market optimism is evident in research released Monday from Jon Peddie Research. Computer vendors stopped ordering graphics chips in the third and fourth quarters last year in anticipation of a long worldwide recession, says Jon Peddie.

While the first quarter brought some improvement, the second quarter saw a return to the races. The average second-quarter growth in graphics chip sales over the past eight years was 0.8 percent. This year it was 31 percent, says Jon Peddie, as the industry began preparing to build products for the end of the year.

Obviously the boost could be compensating for the less-than-expected first quarter. But the shipment of 98 million graphics chips can’t be fully explained this way.

The industry won’t return to 2008 levels until next year, says the research firm. But there are good reasons to expect a respectable market this year.

Two new operating systems will come out in the fourth quarter: Microsoft’s Windows 7 and Apple’s Snow Leopard. Graphics chip vendors Nvidia and AMD’s ATI meanwhile will introduce new higher-performing designs made at 40nm.

On top to that, worldwide economic stimulus programs will be in full swing, fueling pent up demand for new machines

It is unclear how the economy will fare during the remaining five months of the year. Let’s hope the computer industry has it right.