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Intel, the world's largest semiconductor maker, on Thursday raised its second-quarter revenue expectations as it reported continuing strong demand for its notebook computer chips.

In a mid-quarter update after the New York market closed, Intel said its expected sales range of $8.6bn to $9.2bn had been lifted to $9.1bn to $9.3bn. Gross margins should also improve in the quarter to July 2, from about56 per cent to 57 per cent, it said.

Analysts have predicted that Intel's growth will be driven by the strength of its Centrino chip platform for notebook PCs. Current Analysis, a research firm, reported this week that US notebook retail sales in May exceeded those of desktop computers for the first time in a calendar month. Intel said gains from equity investments and interest would be higher than previously thought at around $100m, from $70m. An increase in research and development credits would reduce Intel's tax rate to about 26 per cent, compared to the previous expectation of 31 per cent.

The company said all other expectations were unchanged.

In a good week for Intel and the chip industry, Apple revealed on Monday that it was switching to Intel processors for its range of notebook and desktop computers.

Texas Instruments, the number-two US chipmaker, said on Tuesday that it was seeing improved demand as it raised forecasts for second-quarter profits and sales

The Semiconductor Industry Association's 2005 forecast returned to growth on Wednesday as it revised estimates from flat sales to a 6 per cent increase for the year. It cited demand for mobile phones, computers, digital televisions and cameras as the key driver.

Intel shares, which have enjoyed a run-up from $22 in mid-April, were down 1.2 per cent in after-hours trading at $27.36.

RBC Capital Markets analysts upgraded their price target to $29 on Thursday as they raised their revenue forecast for the third quarter to $10.1bn and earnings per share from 33 cents to 36 cents. Intel would continue to outperform the semiconductor sector over the next few months as its margins tracked higher, they said in a note.

“A big driver for Intel's strength over the past few quarters seems to be notebooks and government spending from devleoping countries that are trying to grab their share ofthe global PC renaissance,” RBC said.

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