Is the worst over for the world economy? Has the recession finally bottomed out? Does the recent upward trend in the world markets signal recovery? Everyone seems to be looking for answers to these questions.

One industry which increasingly seems to believe that recovery has started is the chip industry. Several analysts feel that the recovery process has finally begun in the chip industry.

Here are five factors which are guiding the analysts’ optimism about the sector.

Estimated graphics chip shipments and supplier market share for first quarter showed solid growth for both Intel and Nvidia, according to a research report.

In an optimist statement, the market research company, Jon Peddie Research, said that graphics chips (GPUs and IGPs) are a leading indicator of the PC market. Jon Peddie Research, which tracks the graphics chip market, noted that shipments were up 3.3 per cent from the fourth quarter, "breaking an eight-year seasonal trend that dictated negative sales from Q4 to Q1.

The company continues to predict an upturn in the PC market in Q3/Q4. In addition to being optimistic on possible graphics shipment growth in the two PC-industry seasonally favorable quarters, Jon Peddie Research noted that it expects new designs from ATI and Nvidia, as well as GPUs based on 40 nm, to encourage gains.

Chip giant Qualcomm recently said that it is seeing a pickup in chip demand. During the company's second-quarter earnings conference call, CEO Paul Jacobs said, "We're feeling more comfortable looking forward...We're happy to see chip demand up."

He added that inventories are stabilising, reaffirming the device demand, and the company has very strong operating cash flows.

The world's largest maker of cell phone chips had revenue of $2.46 billion, down from the $2.61 billion posted in the same quarter last year, and posted an operating loss of $10 million, reflecting a $748 million charge for litigation settlement related to the settlement and patent agreement with Broadcom.

The two biggest makers of memory chips, Samsung Electronics Co and Hynix Corp, both of South Korea, last week announced smaller chip-related losses for the first quarter than they experienced a year earlier.

Looking at the first-quarter situation, I have to believe that the memory market has hit the bottom said a memory-chip market analyst at iSuppli Corp. According to him, from here it is the recovery stage. The only problem being that the manufacturers have a long way to recover.

Mercury Research, another firm that follows chip markets, said that overall graphics chip shipments were up 3.8 per cent from the fourth quarter of 2008. The uptick was attributed to improved desktop sales.

Earlier this month, expectation-beating quarterly results from leaders of other chip segments, such as Intel Corp in microprocessors and Texas Instruments Inc in digital signal processors, also raised hopes that the industry's downturn may be reaching a turning point.

Intel CEO Paul Otellini said recently, "I believe the worst is now behind us from an inventory correction and demand-level adjustment perspective."