Small PC system builders are bracing themselves for the after-effectset in wake of poor financial results. of National Semiconductor's withdrawal from the cutthroat, low-end processor market, after the vendor conceded defeat and announced its retreat last week.
In a statement, Brian Halla, chief executive of National Semiconductor, said the vendor will 'immediately cease slugging it out in the PC processor market, which has been dragging down our financial performance for several quarters', and switch focus to interactive set-top boxes, thin clients and servers, and portable Web devices.
But according to component distributors, National Semiconductor's withdrawal into the information appliances market will push up the price of low-end chips because that sector will be now be controlled by fewer players.
Sukh Rayat, managing director of Flashpoint, said the vendor's exit was a bad move for the market because it meant less choice for PC builders.
'Several PC builders carved out a niche at that end, mainly around the Cyrix chip. At the moment, there is nothing to replace these machines,' he told PC Dealer, adding that because the market for sub-£1,000 PCs was still growing, it would be easy for chip vendors to raise the prices of the chips. 'The $30 to $40 processor will cease to exist,' Rayat predicted.
However, Tony Wand, sales director at Datrontech Group, likened such a price hike by the remaining vendors to a 'moth flying towards a flame', warning that it would be foolish to raise prices within that sector of the market.
'The market wouldn't stand for it. Besides, there is a place for cheap PCs and one for higher quality machines,' he added.
Commenting on National Semiconductor's retreat, Rayat said: 'A very cash-rich business has taken its toll. National Semiconductor was primarily a components firm that couldn't get its head round the fast-moving chip market.'
National Semiconductor also revealed that it expects to take a one-time charge of between $250 million and $300 million in its fourth quarter ending 30 May and is in discussions with potential partners for the South Portland manufacturing facility.
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