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Intel Corporation (INTC), Micron Technology, Inc. (MU): These Chip Makers Have Upside Despite Double-Digit PC Slump

International Data Corporation (IDC) provided another somber outlook for the personal-computing market. IDC forecast quarterly shipments to drop 11.7% starting from May. The net growth for 2013 will be 7.8%. With such a negative outlook, are any PC suppliers and builders a good investment? Thankfully, a number of chip suppliers lowered their reliance on the PC market for sales, unlike PC makers such as Dell Inc. (NASDAQ:DELL) or Hewlett-Packard Company (NYSE:HPQ). There are four chip makers whose shares still have potential upside despite a forecast for lower computer sales.

Memory supplier benefits

Micron Technology, Inc. (NASDAQ:MU)

Micron Technology, Inc. (NASDAQ:MU) shares are already up 126% year-to-date. Weaker PC sales would hurt DRAM demand, but Micron could simply shift its chip production away from PC markets and toward mobile devices. More upside remains if Micron capitalizes on higher sales in markets outside of the PC sector.

Micron Technology, Inc. (NASDAQ:MU) is already shifting DRAM production to NAND. Earlier this year, the company introduced the smallest 128-Gigabyte flash device that is made using just 20-nanometer process technology. NAND is used in removable storage devices like USB drives and flash drives. The market is expected to grow by 35% this year.

Micron Technology, Inc. (NASDAQ:MU) acquired bankrupt firm Elpida to increase its capacity. Some of the capacity may be shifted for mobile DRAM production.

Laptop processors improve

When Intel Corporation (NASDAQ:INTC) debuted its Haswell processor at Apple Inc. (NASDAQ:AAPL)‘s Worldwide Developers Conference, the company showed once again that it could offer more processing power with lower power consumption. Apple said that its 11-inch MacBook air will now have nine hours of battery life compared to five hours on the last model. The 13-inch MacBook Air will have 12 hours compared to seven hours on the previous model.

Intel Corporation (NASDAQ:INTC)’s strategy is to demonstrate that it can design chips that will help laptops compete more effectively against tablets. Strong Apple Inc. (NASDAQ:AAPL) tablet sales are thought to be one of the main reasons PC laptop sales are struggling.

Credit: Intel Corporation (NASDAQ:INTC)

Haswell also has an updated graphics chipset, the HD 5000. Apple claims that the graphics performance will be a 40% improvement over the previous model.

Graphics-chip makers

When PC sales slump, NVIDIA Corporation (NASDAQ:NVDA) and Advanced Micro Devices, Inc. (NYSE:AMD) are often viewed by investors as being at a disadvantage. This time might be different for both companies. AMD, a processor and graphics-chip supplier for the PC, is diversifying away from the sector. AMD is the supplier for Microsoft Corporation (NASDAQ:MSFT)’s upcoming Xbox One and for Sony Corporation (ADR) (NYSE:SNE)‘s PlayStation 4.

For the current quarter, Advanced Micro Devices, Inc. (NYSE:AMD) forecasts gross margins to be in the 39% range. In comparison, Intel Corporation (NASDAQ:INTC) reported gross margins of 56% in its quarter. AMD should be expected to improve its profitability. The company is containing costs, and much of the operating expenses took place in the first half of the year for product development. Restructuring is largely complete, and new products will be released in the second half of this year.

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