Gadgets Spurring Demand; Tough Going for PCs

TECHNOLOGY

Forget Corporate America. Consumers and gadgets are expected to spur technology sales in 2006.

Semiconductors, a key sector in Orange County, could grow even faster than the overall tech industry next year, market watchers say.

Corporate technology spending is projected to grow 5.5% in 2006, up from 3.5% growth this year, according to Gartner Inc.

Global chip sales are seen growing 8% to $246 billion, according to the San Jose-based Semiconductor Industry Association.

For 2005, chip sales are seen coming in 7% higher at $227.6 billion.

"We're looking forward to 2006," Bill Ruehle, Broadcom Corp.'s chief financial officer, said at November's UBS Global Communications Conference in New York.

The Irvine chipmaker is looking at "a dozen or so growth areas for 2006," Ruehle said. "There is no shortage of things to do."

Among them: chips for satellite and cable TV boxes, high-speed modems, Internet phone calling, wireless networking and handheld devices such as Apple Computer Inc.'s video iPod.

Consumer electronics are playing a bigger role for Broadcom and other companies, including Lake Forest-based Western Digital Corp. and Newport Beach's Conexant Systems Inc.

"The main difference between now and the 1990s is that the largest single segment then was corporate IT," said John Greenagel, a spokesman for the chip association. "Now, it's really consumers."

Corporate America has been more interested in stability and calculated tech buying for the past couple of years.

Aliso Viejo-based Centon Electronics Inc., a longtime seller of computer memory products, has seen newer consumer devices grow to nearly a third of its $115 million in 2005 sales, Chief Executive Gene Miscione said.

Three years ago, gadgets made up less than 5% of sales.

Centon in the past year came out with digital music players sold in stores of Dallas-based CompUSA Inc.

"We see it as an active market," Miscione said. "The demand is there."

The computer sector could face tougher times as profits are squeezed amid competition, according to Gartner.

Computer shipments could grow by 8% annually next year through 2009.

But revenue is set to stay flat.

That stands to make the task of turning around Irvine's Gateway Inc. tougher.

The computer maker is on a comeback that saw a return to profitability in summer. Analysts expect the company to boost its earnings by about 40% next year.

Much of Gateway's profits have come from heavy cost cutting by Chief Executive Wayne Inouye. Now the focus is on growing sales.

Next year, analyst see Gateway's sales rising 10% to $4.3 billion.

Gateway-a relatively small player competing with Hewlett-Packard Co. and Dell Inc.-is an oft-cited takeover target.

The talk has heated up of late, spurred in part by the growth plans of Asian computer makers.