"The recession is not over," said Sean Maloney, executive vice president and general manager of the Communications Group at Intel, based in Santa Clara, Calif. "We don't see a recovery until the second of this year," Maloney lamented during a press event at IDF on Monday evening.

The communications market took off in late-1990s, but both chip makers and systems houses hit the wall starting at the end of 2000. At the time, chip makers claimed the market was experiencing an "inventory correction," although the events quickly turned into what analysts believe is the industry's worst downturn.

Instead of a "correction," a glut of inventory and lackluster demand wreaked havoc among vendors in 2001, especially suppliers of wireline chips, such as Agere, Agilent, AMCC, Broadcom, Conexant, Hitachi, Motorola, PMC-Sierra, Vitesse, and, of course, Intel.

Now, the dynamics of the downturn have changed to some degree. "It is not an inventory issue right now," Maloney said. "Everyone is pushing out capital spending. That's the real issue," he said.

The Intel executive was referring to a lack of capital spending among the major carriers and equipment vendors. Like the chip makers, carriers and systems houses are also suffering amid the downturn.

There are some bright spots, however. For example, the Gigabit Ethernet market is making a rapid transition from the enterprise to the high-volume desktop market--a move that spur demand for LAN cards and chips, he said. Intel is one of the world's leading suppliers of LAN cards and chips, it was noted.

Another hot market is the so-called metropolitan-area network, sometimes called the MAN or metro. Chips and systems for 10-gigabits-per-second applications, including SONET and Ten Gigabit Ethernet, will move from the MAN to the enterprise over time, according to Maloney.

Wireless local-area networks are also taking off, especially the 802.11 standard. "802.11 is a clear winner," he said. "My believe the market will move to an 802.11ab combination. 802.11g is a distraction," he said.

Another driver for communications is the shift toward off-the-shelf building blocks in a business strategy that Intel calls "modular infrastructure" systems (see today's story).