PC market will rebound in 2003: double-digit increase contrasts with anemic growth in tech overall.

The struggling personal computer market, which showed its first-ever year-to-year decline in 2001 and has remained flat so far this year, will experience a miniscule rise by December and grow next year, a new report has predicted.

The report, "Desktop PC Processors," from market analyst Cahners In-Stat/MDR, indicates that PC market growth will be a scant 1% in 2002, but will rebound with somewhat healthier 13% growth next year. Tn-Stat feels that the rebound will be driven by new product announcements in 2003, including Intel's Banias and Prescott processors and AMD's Hammer family of CPUs, and by pent-up demand.

Not surprisingly, the report also predicts that Intel Corp. will retain its lion's share of the desktop processor market in 2003, and will continue to beat AMD in raw chip clock speeds (AMD recently surpassed the 2GHz mark, while Intel is very close to 3GHz). As long as Intel's marketing machine continues to convince consumers that clock speed matters, In-Stat feels, the company's leadership position in the market will remain assured.

In-Stat said that Intel will hold a formidable 81% market share at the end of this year. In the first half of 2002, "Intel's Pentium 4 left AMD's Athlon XP in the dust on clock speed, and it will continue to do so as long as Intel is able to convince end users they need a processor that runs at multiple-gigahertz speeds," the report predicts.

However, the company postulates that despite this, AMD's Hammer could prove to be a tough competitor in 2003. "Significant clock increases and the introduction of Hyper-Threading into mainstream desktop PCs will allow Intel to keep faith with Moore's Law, which implies processor performance should double every 1824 months," said Kevin Krewell, a General Manager with In-Stat/MDR. 'This race for speed also helps Intel compete with AMD, as Athlon XP has not been able to keep pace and will be pushed into competition with Celeron, much as the K6-2 was. Once the Hammer family begins to ship in eamest in 1H03, AMD should be able to respond with its own differentiated processor," Krewell said. "Until then, Intel is in the driver's seat."

Without the pricing pressure from AMD, it is possible that we might have seen RDRAM in mainstream desktop machines by now. However, with margins in the PC market already thin, Intel has chosen the more economical DDR SDRAM for its desktop systems; Intel has sentenced Rambus RDRAM to permanent purgatory in high-end machines and other niche systems. In-Stat says that Intel's chip sets will continue to focus on DDR SDRAM support and integrated graphics in 2002 and 1H03. Intel will add DDR-II memory support (with integrated graphics) to Prescott chip sets in 2H03. (The 850E chip set, with RDRAM memory support, has been relegated to a high-end niche product, In-Stat says.)

But while the PC market may hit double-digit growth next year, other forecasts are not quite as rosy. Gartner Dataquest has released its overall predictive numbers for 2003, and the news is not especially encouraging. Gartner lowered its 2002 technology spending growth forecast to 3.4% from 7.6%, and indicated that growth in software, services and telecommunications would make up for a decline in new PC sales. In 2003, Gartner predicts, spending will rise 7%, not 9.6% as previously indicated. The firm also said it expects overall technology revenue of $2.30 trillion in 2002 and $2.46 trillion in 2003, up from $2.23 trillion in 2001. Gartner said tech spending fell by 0.4% in 2001.