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Positive Signs Seen For Chip-Sector Recovery

Growth expected this year as businesses replace Y2K-age PCs
The semiconductor market is expected to grow 11% this year as businesses start buying PCs, continuing a chip-sector recovery from the crash of 2001. Market research company Gartner Dataquest last week said it expects worldwide semiconductor sales this year of $173.2 billion, up from $155.8 billion last year. Early signs of stronger business-PC buying and demand for cell phones and consumer electronics are good signs, Gartner says.

PCs in most companies are aging, raising maintenance costs. "A lot of these pre-Y2K PCs are getting to the end of their life," Gartner analyst Richard Gordon says.

U.S. chip vendors reported mixed news last week. IBM cut 600 jobs in its semiconductor business, which lost money in the second quarter on weak demand and unexpectedly low yields from the company's advanced East Fishkill, N.Y., plant.

Shares of Advanced Micro Devices Inc. rose last week on an investor's comment that Sun Microsystems may use AMD's 64-bit Opteron processor in its servers. In August, Sun said it would ship a version of its Java 2 Standard Edition software that supports the AMD chip, which competes with Intel's Itanium processors. Sun says it's evaluating Opteron for future entry-level products.