Chip Market Freefall Expected Until July

Global PC microprocessor sales in the fourth quarter of 2008 fell at a rate not seen in 12 years, and the market is likely to continue spiraling downward at least through the first half of this year, a research firm said Wednesday.

Shipments in the quarter dropped 11.4% from the same period a year ago and 17% from the third quarter, IDC said. Market revenue fell 22.2% year-to-year and 18% quarter-to-quarter to $6.78 billion. For the full year, processor shipments grew by 10%, while revenue rose 0.9% to $30.8 billion.

''The decline in PC processor unit shipments in the fourth quarter was the worst sequential decline since IDC started tracking processor shipments in 1996," IDC researcher Shane Rau said in a statement. "After hinting at a decline last September, the market fell off a cliff in October and November.''

Indeed, the only bright spot in the otherwise bleak results was Intel's Atom processor for mini-laptops with screen sizes of 10 inches or less that sell for less than $500, with many models selling as low as $300. Without Atom, the market would have fallen 21.7% quarter-to-quarter and 21.6% year-to-year

As to the vendors, Advanced Micro Devices continued to lose share against its larger rival Intel. In the fourth quarter, Intel earned an 81.9% market share, a gain of 1.1%, while AMD had a 17.7% share, a loss of 0.9%. VIA Technologies had a 0.4% share.

For the full year, Intel gained 2.9% to end the year with 80.3% and AMD lost 3.1% to finish 2008 with a 19.2% share. Via finished the year with 0.4% of the market.

Because chip demand is expected to remain weak, sequential processor unit shipments will decline in the first and second quarters of this year, IDC said.

Despite the weak market, Intel is moving as planned to its next-generation desktop and laptop processors. The company on Tuesday said it would spend $7 billion over two years on its U.S. manufacturing facilities that will produce the new products.