China's love for netbooks powered by Intel's Atom processor was a key driver behind record shipments in the global PC chip market in the third quarter, a research firm said Monday.

PC processor shipments in the quarter rose by 23% from the second quarter, double the normal growth for the period, IDC said. The strong performance showed that the market is recovering from the economic recession, prompting the researcher to raise its forecast for chip shipments this year to well over 300 million units, an increase of 1.5% over last year.

"Compared to where the market was at the beginning of 2009, PC processors have come back remarkably strong," said Shane Rau, IDC's program director of computing, networking, and storage semiconductors, in a statement.

But despite the market recovery in the second half of this year, IDC was cautious in making predictions for 2010. That's because the market's growth has been due to shipments of inexpensive Atom processors being sold in netbooks in China, where government incentives have stimulated growth.

"The Chinese market can be very opaque -- there are lots of places where inventories can hide," Rau said. "We have to be on the lookout for when China decides it can't consume more processors. Meanwhile, the U.S. market is still hamstrung by housing foreclosures and rising job losses."

Still the chip market's performance in the third quarter was impressive. PC processor shipments slightly exceeded those of the third quarter in 2008, which was a record quarter, IDC said.

Market revenue, however, reflected the impact of the popularity of Atom, Intel's low-priced chip that dominates the market for netbooks, which are mini-laptops with prices that start as low as $300. While overall chip shipments rose 23% from the second quarter, market revenue rose by just 14.1% to $7.4 billion.

"While Atom processors led the PC processor market to reach record unit shipments, on the revenue side, their low average selling price led to notable price erosion, more than 7%," Rau said.

Looking at the market by category, third-quarter shipments of mobile PC processors, which include Atom, rose 35.7% from the second quarter, while desktop PC chip shipments grew 11.4% and x86 processor shipments increased 12.2%.

As to the vendors, market leader Intel gained share at the expense of rival Advanced Micro Devices. Intel shipments rose quarter-over-quarter by 2.2% for an 81.1% share, while AMD's share fell 2% to 18.7%. VIA Technologies's share rose 0.2% to 0.6%.

IDC's latest numbers followed the market rebound the researcher saw in the second quarter. However, IDC at the time cautioned that the 12.5% increase from the first quarter was due to hardware makers replenishing inventories and rather than higher PC sales. Since then, computer makers have reported seeing the beginnings of a market recovery following a recession-driven slump.

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