Chip Forecast Grim; Nehalem to the Rescue? - Page 2

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What Will Save U.S. Chip Firms?

The problem is not just confined to the U.S., it is an international issue. "The U.S. is definitely in the worst shape, but we're seeing even in Asia people are being very conservative in their spending. Europe is not pretty either," said Leong. "Any growth to be had is coming from emerging markets, but it's slow compared to last year."

Rau said the Chinese market will continue to grow and be what keeps the U.S. afloat. "It may subside, but anybody will look at it and be envious of its numbers. China could carry us through the recession and be an indicator of when it's over," he said.

But Intel's new Core i7, a.k.a. Nehalem, won't be the savior for the market, nor will AMD's Shangai server chip, both of which ship this month. Intel has finally lifted the NDA on testing results and reports from around the Internet indicate the i7 packs quite a punch.

The Core i7 is a significant new chip design from Intel that moves the memory controller onto the chip, thus eliminating the frontside bus, a major bottleneck in Intel chip performance. AMD's (NYSE: AMD) chips have had this advantage for a while. Initial benchmarks are showing performance gains ranging from 20 to 40 percent, depending on the application.

But for now, people just aren't buying. "I see Nehalem making an impact in 2010 when the economy begins gaining momentum again as corporate upgrades start, since they will be putting off their upgrades in the short term," said Leong.

"I would find it hard to see any processor would stimulate market growth based on performance," said Rau. "Performance doesn't make a difference if someone buys a processor or not. It makes a difference in choosing one competitor over another. So they won't drive a lot of growth."