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Graphics Chip Sales Point To PC Market Recovery

Shipments rose 31% in the second quarter, an indication that computer makers are preparing for a robust back-to-school season.

Graphics chip sales indicate that the PC market is poised to see an upturn in the second half of this year, a market researcher said Tuesday.

Graphics chips are a leading indicator for the PC market, because the hardware goes into a system before it's sold to the end customers. While improvements in graphics chip shipments were less than expected in the first quarter, the second quarter was "very good" and indicated computer makers were getting ready for a robust back-to-school season, Jon Peddie Research said.

Compared to the first quarter, graphics chip shipments rose 31.29% in the second quarter to 98.3 million units, according to Peddie Research.

Graphics chip sales are expected to return to normal seasonality during the second half of the year. The economic recession has thrown the market out of whack. For example, computer makers stopped buying graphics chips and depleted inventory in the second half of last year, a period when sales normally rise in preparation for the back-to-school and holiday seasons.

Chip sales are not expected to hit the levels of 2008 until next year. In the meantime a number of factors will take the market to an upturn this year, Peddie Research said. Those factors include the scheduled release of two new operating systems, Apple's Snow Leopard and Microsoft's Windows 7; aggressive pricing and higher performing 40-nanometer chips from Advanced Micro Devices and Nvidia; pent up demand as a result of computer maker's depleted inventories; and the impact of government stimulus programs worldwide.

Peddie Research is not the only researcher predicting an improved PC market. IDC this month said global PC shipments in the second quarter fell by half of what was expected, primarily due to the continued popularity of mobile PCs. IDC expects the PC market to return to growth by the end of year.

The three top graphics chip makers saw their market share increase in the second quarter. Compared to the first quarter, AMD had the largest increase at 41.5%; followed by Intel, 35.2%; and Nvidia, 23.6%. AMD ended the quarter with an 18.4% share; Intel, 51.2%; and Nvidia, 29.2%.

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