China will overtake Japan in PC sales: Intel

KUALA LUMPUR: U.S. chip behemoth Intel Corp said on Wednesday China will overtake Japan as the world's second biggest PC market this year, earlier than expected and underscoring the weak demand in Asia's most mature market. Intel is the number one maker of microchip processors, the brains inside a personal computer or PC.

But Christian Morales, Intel's vice-president of Asia Pacific, said the outlook for the semiconductor industry remained bleak despite bright spots in emerging markets. "The trend is the same worldwide, with matured markets flat or down and emerging markets still growing," Morales told a news conference in Kuala Lumpur.

"Things can only get better when companies' bottom lines get healthier. When that's going to happen ? At this point in time, that would be speculating." Last week, Taiwan Semiconductor Manufacturing Co sparked a sell-off in global technology stocks when it reported disappointing profits and warned that the July-September quarter might get even tougher. All of the world's top three chipmakers have cut back on their spending plans in just the past two weeks, citing softening demand for electronics in many markets.

Intel lowered capital spending plans by $200 million to $5 billion and announced another 4,000 layoffs, but said the cost-saving measures would not affect chip-making capacity plans. Morales said the firm would continue investing in emerging markets but sidestepped questions on whether there would be job cuts in Asia. "Our strategy is the same where markets are growing, but in some of the matured places, there will be attrition," he said.

Intel, which reported a seven percent drop in worldwide sales to $6.3 billion in the second quarter, said contribution from Japan fell one percentage point to seven percent. Revenue share from the rest of Asia-Pacific, including China, rose to 38 percent from 36.

"Before, we thought it would take another year or two but this year itself, China will overtake Japan in the personal computer market," Morales said.

Next billion by 2008

PC sales have crossed the 1 billion-unit mark, according to data released early this month by industry researcher Gartner Dataquest. Gartner projects that another one billion personal computers will be sold by 2008, with demand coming mainly from China, Latin America and Eastern Europe. Eyed for its one billion-strong population, China is already the top buyer of cellphones in Asia. Its vast and cheap labor force has attracted droves of international high-tech firms to set up shop.

Intel, which now derives some 70 percent of its revenue from outside the United States, opened a $500 million plant in China last April.

($1=3.8 ringgit)

 ©Reuters