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Chip makers face 'unprecedented' downturn

Industry body warns of plummeting shipments

Economic troubles in 2008 caused chip sales to fall by 2.8 percent compared to the previous year and there are no clear signs of when the market will turn around, the Semiconductor Industry Association (SIA) warned on Monday.

"The industry is currently facing an unprecedented period of uncertainty. A resumption of sales growth will depend in part on the effectiveness of various measures now under consideration by the [US] Federal government to restore consumer confidence, improve liquidity, and stimulate economic growth," SIA President George Scalise, said in a statement. The SIA is a US-based industry group.

Worldwide chip sales totalled $248.6bn during 2008, down from $255.6bn in 2007, SIA said. The steepest drop in sales came at the end of the year. Chip sales fell 16 percent during November and 22 percent during December, compared to the previous year, it said.

Chip makers are struggling to predict what happens next.

Last month, Intel, the world's largest chip maker, declared there wasn't enough visibility for executives to predict what the first quarter of 2009 will look like, but took steps to cut costs by closing two Asian assembly plants and a pair of older wafer fabrication plants in the US. The plant closures involve more than 5,000 Intel employees.

Applied Materials, which produces equipment that's used to make chips, announced Monday that it will cut 12 percent of its workforce, or 1,800 employees, by the end of this year to reduce costs. In a statement, executives echoed the SIA's warning, saying the company faces "unprecedented business conditions".

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