A world economic slowdown was blamed for Friday's warning from Intel that Q4 revenues would be flat, contrary to analysts' previous prediction of 4 to 8 per cent growth.
The chip giant's statement blamed "recent large cancellations by customers worldwide". A previous revenue warning in the third quarter had blamed sharply lower demand from European PC makers, with demand continuing to be strong in the US and other geographical regions.
Intel said it expected gross margins for Q4 to stay around 63 per cent. Despite the cancellations, it is not cutting back on its capital expenditure on new production facilities.
In a separate move, Intel today is set to announce a new chip technology that could increase processing power by ten times that of the new Pentium 4. The world's smallest transistor will allow 400m transistors on a single chip by 2005.