Intel and Microsoft face China crisis

A couple of years ago the world plus dog looked to China to pull their nadgers out of the fire as the European and US  markets started to go tits up.

But now it is looking like reality is starting to bite in China too and both Intel and Microsoft are suffering.

The glorious Wintel alliance is expected to report bad sales growth this week as China’s slowing economy shows falling demand for PCs.

Analysts are expecting to hear dark stories from Wintel when they both report their results. No doubt they will both have stonking profits but they will have to report that sales rose five percent or less from a year earlier.

Bloomberg points out growth has been slowing in China, the world’s largest PC market since last year which indicates that electronics makers can’t count on Asia to counterbalance falling demand in Europe or in the US. This is bad news for Wintel.

It has already hurt AMD which disclosed that revenue fell 11 percent in the second quarter, thanks to weaknesses in China and Europe.

Other doom was clearer after Applied Materials, Intel’s largest supplier, cut its annual targets last week, citing delayed orders for its chipmaking equipment because of weaker end-market demand for semiconductors in the same regions.

China had its weakest expansion in three years in the second quarter when its economy improved by 7.6 percent from a year earlier.

Ironically some of this is because the Chinese are dependant on orders US and European tech companies. As US and EU sales slow, so do the orders into the outsourced plants in China.

One of the problems that the Wintel alliance face is that analysts are talking doom and gloom and companies are pulling back on spending as a result. Intel is aware that if it also talks about a technology meltdown it will make matters worse so it is expected to be upbeat when it announces its results.

Microsoft has also been suffering and missing its targets while the Windows group has missed analysts’ estimates in four of the six quarters. The Tame Apple press has been claiming that this is due to customers shifting to tablets which don’t run the operating system, but it is more likely that it is due to people are hanging on to PCs longer having been put off by a lackluster economic recovery in the US and concerns about the debt crisis in Europe.

It is not helped by the fact that people are putting off buying a PC until after Windows 8 is released.

All up, this is going to be a messy week for technology companies.