An improving market for semi-conductors should grow 11 per cent by the end of 2003, with help from a strong first half of the year and increased activity by chip manufacturing companies, according to Gartner.
Worldwide revenue from semi-conductor sales would reach $US173 billion by the end of 2003, up from revenue of $US156 billion in 2002, the company said.
The predictions are roughly in line with Gartner's forecast from last November, when it said chip sales would reach $US171.8 billion in 2003, but more optimistic than the research company's expectations of $US167 billion revealed earlier this year.
Demand for silicon was rising at semi-conductor manufacturing companies, which were also increasing their utilisation rates, Gartner said.
Sales of cell phones and consumer electronics devices were responsible for part of the increased demand, and the beginning of a corporate PC replacement cycle had actually arrived, it said.
The last PC buying spree, driven by corporations preparing for Y2K software problems, was a concentrated burst of spending activity.
The current replacement cycle is more drawn out, and instead of a measurable short-term surge in demand, vendors would see an incremental increase in spending on new PCs over the remainder of the year, Gartner said.
The telecommunications sector was still saddled with excess capacity that would keep spending on telecom semi-conductors depressed for the near term, Gartner said.
Second-quarter earnings results among semi-conductor vendors and hardware companies appear to back up Gartner's predictions.
Intel reported an 8 per cent rise in revenue year-over-year, driven by sales of notebooks with its new Pentium M chip, and Dell's revenue increased 16 per cent on strong increases in PC and server shipments.
But IBM reported a 1 per cent decline in overall hardware revenue and a 3 per cent decline in PC revenue during its second quarter.
Overall IT spending should also increase in the second half, driven by higher-than-expected spending on software, Gartner said.