The semiconductor market is set to continue its steady recovery during 2004, thanks to the long-awaited corporate PC replacement cycle and mobile phone sales.

Analyst IDC has predicted a healthy growth rate of 18 per cent across the sector in 2004, following a strong recovery in the second half of last year.

Stronger than expected sales of PCs and mobiles have helped to stabilise average selling prices and increased capacity utilisation rates among suppliers.

Mobile phone shipments will surpass 530 million units this year, while PC shipments will grow by 11 per cent to more than 152 million units.

IDC predicted that unit shipments for phones and PCs will grow in double digits for the year, driving a healthy growth cycle for more than half of the semiconductor industry.

IDC claimed that from 2003 to 2008, semiconductor market revenue will grow from $160bn to $282bn. The long overdue replacement of PCs by the slow-spending corporate sector will account for an increasing share of PC sales in 2004.

"The PC replacement cycle has not really started yet but most expect it to start this year," said Les Billing, managing director of distributor Microtronica.

"That said, there is a fair amount of server replacement activity going on. Most PCs within firms are five years old now and something has to happen, because they can't handle new software.

"Support for NT has almost finished, so businesses are being forced to change operating systems. This, in turn, requires better hardware.

"The system builders and integrators we deal with all feel there is a general improvement in their customer base."

On the global front, IDC claimed that China is the largest consumer of mobile phones and the second largest consumer of PCs, and predicted that the country will play a key role in fuelling the recovery.

Also, thanks to increased pressure on OEMs and chip suppliers by investors to increase profits and revenue, China has become the focal point for much outsourcing.

"China has become a fertile ground for disruptive innovation as its low-cost suppliers naturally aspire to move upmarket," said Mario Morales, vice-president of semiconductor research at IDC.

"We expect that these emerging Chinese semiconductor companies will play a key role in shaking up the competitive ranks among OEMs, original design manufacturers and semiconductor suppliers over the next five years."

crn@vnu.co.uk