To date, engineers have been largely immune from the cuts. An IEEE-USA spokesman said there haven't been any reports of large engineering-staff layoffs but that concern is growing.

Warning that the communications equipment segment is sliding into a downturn that could last at least until the end of the year, Nortel said it would reduce its work force by about 10,000 this year, some of it by attrition, including retirement. That is up from December's plan to cut 4,000 jobs.

In its first-ever layoff, Dell Computer Corp. (Austin, Texas) announced this week that it is cutting about 1,700 jobs, or 4 percent of its work force. Also in Austin, Applied Materials, the semiconductor equipment maker, said it would lay off several hundred at its manufacturing base there and ask others to take unpaid days off.

Motorola Inc. has announced plans to eliminate as many as 4,000 jobs this year from its Semiconductor Products Sector. Cuts are expected across all segments of the chip division and across all geographic regions, and a spokesman did not rule out layoffs within engineering departments. Jobs will be eliminated through a combination of layoffs, attrition, voluntary severance and the termination of contract and short-term assignments.

Meanwhile, test-gear maker Credence said it will cut its work force by approximately 200 people, or 14 percent of its worldwide total head count, in the wake of a first-quarter revenue warning.

And computer maker Acer plans to slash about 500 from its Taiwan work force as part of a restructuring plan begun in December. All of them are foreign contract laborers who assemble motherboards and notebook PCs at Acer's Hsinchu plant, said an Acer spokeswoman.

There are also signs that troubled Xerox may make staff cuts beyond the 6,000 already announced. An executive vice president said Xerox might let go up to a total of 10,000, though a spokesman later said that those remarks were "speculative."

The latest news is prompting concern at IEEE-USA that engineering jobs might be affected. One fear is that last year's increase in the number of temporary H-1B workers allowed into the United States might prompt corporations to trim higher-paid American employees while keeping temporary immigrants who often earn less.

"If the market supply catches up with demand, I would hope that they will put the brakes on the extra 80,000 H-1Bs," said Merrill Buckley, past president of the IEEE-USA. "If the economy goes down and they continue to bring in guest workers, we've got a problem."

The widespread downturn is causing market forecasters to reconsider 2001. IC Insights originally predicted worldwide semiconductor sales would grow by 22 percent this year, but recently revised its forecast to 7 percent growth this year and 9 percent in 2002.

The slowdown in both the PC and communications sectors has resulted in warnings by 3Com, Cisco, Ericsson, Lucent, Nokia, Motorola and other major OEMs that profits and growth will take a hit in the first half of 2001 — or beyond. Even the high-flying communications chip makers — including Agilent, AMCC, Broadcom, Conexant, PMC-Sierra, Vitesse and others — are beginning to see their first-ever slowdowns.

In the communications space, analysts believe the problems stem from a slowdown in spending among the major carriers, especially in the U.S. market.

"While we previously noted that economic uncertainties and capital constraints were impacting our outlook, we are now seeing a faster and more severe economic downturn in the United States, which we now expect will result in a slower [than expected] overall market growth of approximately 10 percent in 2001," said John Roth, president and chief executive of Nortel. "We now expect the U.S. market slowdown to continue well into the fourth quarter of 2001."

However, non-U.S. businesses remain strong. "Partially offsetting the impact of the U.S. market slowdown is the continued solid growth we are seeing in Europe and in the Asia-Pacific and Latin America regions," Roth said.

For the first quarter of 2001, Nortel expects revenue of $6.3 billion and a loss per share from operations of 4 cents on a diluted basis. Analysts expected the company to report sales of $8.1 billion and a profit of 16 cents a share, according to First Call/Thomson Financial.

Cuts in Austin

The staff reductions at Dell, meanwhile, will affect its central Texas operations, where the computer maker employs about half of its 39,000 worldwide work force.

At Austin neighbor Applied Materials, company chairman James C. Morgan said that "slowing worldwide semiconductor sales resulted in a rapid decline in demand for manufacturing equipment late in January," leading to the layoffs. Executives at the level of vice president and above will take a 10 percent pay cut during the downturn. The company also intends to slash its capital-spending budget and cut other spending.

Motorola last month said that orders at the Semiconductor Products Sector, also based in Austin, fell by 19 percent in the fourth quarter of last year, compared with the fourth calendar quarter of 1999. Although sales of networking and entertainment ICs were strong, wireless communication products were hit particularly hard, the company reported. Overall sales of semiconductors reached $7.9 billion last year.

"Each of our business units and support organizations has reviewed its circumstances and is making the necessary adjustments to help the sector meet its goals," said Fred Shlapak, president of Motorola's chip division. "While job reductions are extremely painful, they are a necessary part of our cost-reduction needs."

Will Strauss, president of market research firm Forward Concepts (Tempe, Ariz.), said that one of the main customers for Motorola chips is the parent company. "When somebody in Schaumburg [Ill., Motorola's corporate headquarters] sneezes, people in Austin certainly feel it," he said. DSP sales to the parent have been as high as 70 percent, and are currently well above 50 percent.

Strauss also noted that inventory issues at other OEM customers have had an impact. "Last year, there was a shortage of components for cell phones, and the companies started to place double orders in order to protect themselves. They said they didn't, but they lied," he charged. As a result, demand for these chips is likely to remain slow for at least several months.

For ATE manufacturer Credence, "This downturn did catch us off guard," said chief operating officer David Ranhoff. Along with the layoffs, the Fremont, Calif., company has also ordered all remaining employees to take one week of unpaid leave every quarter, until further notice.

"We have to make some hard choices," Ranhoff said. "This last up cycle was quite short-lived, it was less than a two-year up cycle, when traditionally [up cycles last] three years. It's our belief that this will be a steeper and shorter down cycle than we've seen in the past, and what we're doing now is retrenching, getting ready to take advantage of the next wave."

Citing weakened order activity and lower-than-expected earnings estimates, Graham Siddal, chief executive officer of Credence, said that a recovery may be another year or two off. "We believe the semiconductor industry is in the early stages of a sustained downturn, and a recovery may not take place until late 2001 or 2002," Siddal said. "We are mindful of the effect these dramatic cost-reduction measures have on the lives of our employees."

At Acer, the downsizing brings the Taiwan-based work force down to 6,500 employees, a 7 percent cut. Last year, the company sold some of its overseas assembly plants and laid off more than 1,500 overseas workers as it fought to curb operational expenses and turn around what was shaping up as a bleak year.

"We have overcapacity so instead of having redundant workers it makes sense for us to reduce capacity," said Acer's spokeswoman. "We don't have plans right now to have further cuts this year."

Overall, the world's third largest computer maker saw its revenue dip 19 percent in 2000, to $3.2 billion. January 2001 sales totaled $153 million, the lowest monthly performance in more than three years.

The belt-tightening is part of Acer's broader plan to refocus energy on its core OEM and Acer-brand business units. Acer Group employs 37,000 worldwide and still maintains 15 manufacturing centers in and outside of Taiwan.

"In the future, all low-tech assembly lines will be moved to China and the Philippines, where we already have factories, while most of our high-tech manufacturing will stay in Taiwan," said another Acer spokesman.

Additional reporting by Jerry Ascierto, Mike Clendenin and Terry Costlow, and by Rob Lineback and Mark Lapedus of Semiconductor Business News.