Credit crunch hits chip makers

Falling demand for PCs has hit chip manufacturers Intel, AMD and Samsung.

Falling demand for PCs has hit chip manufacturers Intel, AMD and Samsung.

Intel reported a 90% drop in profits for the fourth quarter last year compared with the same period in 2007.

The chip maker plans to shed up to 6,000 jobs when it closes two chip manufacturing plants and two test facilities.

Samsung's chip division reported a $403m loss, which it blamed on oversupply in the market.

The electronics group reported an overall loss of $16m for the last quarter.

AMD has reported a 35% decrease in revenue compared with the third quarter of 2008 and a 33% decrease compared with the last quarter of 2007.

AMD will cut another 1,100 jobs to further reduce its costs in a worsening market. The latest cuts follow the loss of 2,000 jobs last year.

Senior managers at AMD are to take wage cuts of between 15% and 20%, and staff in the US will have their wages cut by between 5% and 10%.

Growth in PC sales in Europe, the Middle East and Africa slowed from 20% in the first nine months of 2008 to 1.8% in the last quarter, according to analyst firm IDC.

Although growth in Western Europe was still positive at 12%, sales dropped by 24% in Central and Eastern Europe, and remained flat in the Middle East and Africa.

The downward trend is likely to continue for at least the first six months of 2009, said Eszter Morvay, senior analyst at IDC.

The fall in demand due to many businesses delaying, reducing or cancelling orders is being compounded by the lack of credit.

"PC suppliers are scaling back on production, and consequently demand for computer chips, because distributors and resellers are unable to pay for stock," said Morvay.

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