NEW YORK (Trefis) -- Global macroeconomic uncertainties caused by the eurozone crisis, low global GDP growth rate and the economic slowdown in emerging markets, have led to the current weakness in demand for semiconductors.
Unlike some of its competitors such as AMD (AMD), which succumbed to the harsh economic environment with an 11% sequential decline in its earnings, Intel (INTC) yet again proved its dominance in the market by posting a 4% year-on-year increase in second-quarter revenue.
The company's stock has registered a 5% increase in its value since the start of the year. (See related articles Intel Weathers Soft PC Market With Healthy Q2 Results and AMD's Earnings Were Weak But Long-Term Positives Are Intact.)
While current demand for smartphones and tablets remain strong, the slowdown in the PC market remains a cause of concern for the semiconductor industry. Intel made its much awaited entry in the lucrative mobile computing market early this year, which we feel helps the company stay abreast with changing consumer trends.However, it continues to derive over 60% of its value from the PC market, which makes its valuation highly vulnerable to any negative development in this space. The continued slowdown in consumer spending in US and Europe and a moderation in growth from emerging markets has forced Intel to lower its annual sales target for 2012 to 3% to 5%. (See our complete analysis for Intel.) Sluggish Asia-Pacific PC Market Apart from economic instability, the global PC market had been considerably affected by the hard-disk-drive shortage caused by flooding in Thailand last year. As the growth from developed economies near saturation, the expanding demand from emerging economies, such as China and India, is expected to fuel the future growth in global PC shipments. However, as per research firm IDC, the ongoing turbulence in western economies seems to have caught up with the emerging economies. The PC market in the Asia-Pacific region registered a 1% year-on-year decline in the second quarter. We believe that this is a temporary phase as the sustained public sector IT spending and the unpenetrated markets in these regions offer immense potential for future growth. We continue to believe the emerging markets will make a significant contribution to growth in PC demand and estimate the global PC sales (excluding netbooks) to register around 4% growth in 2012.
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