The unexpectedly big shortfall forecast by Intel last night has underlined that the mushroom cloud created by so-called toxic assets will deliver fallout across the globe. And the semiconductor industry will be no exception to this.

Intel's forecast of sharply reduced sales will have been directly affected by the massive shake-ups and consolidations in the financial sector. It appears that everyone, whether they be corporations, suppliers, chip companies or individuals are  hunkering down for a harsh winter and very possibly a financially freezing 2009. The firm's shares hit a 12 year low on NASDAQ  (tick: INTC) today, but have somewhat recovered.  AMD, which launched its "Shanghai" 45 nanometre processors today, is trading at a very low $2.48 at press time. This time last year, its share price was $13.27.

AMD India's Krishna, Chandrasekar, Mukherjee, Muthuswamy, Sharma

Yesterday, Applied Materials, which makes the kit semiconductor firms need to make the chips, showed large drops in net sales and net profit and said it would lay off 12% of its staff in order to keep afloat in these challenging times. 

Applied has suffered from the slump in the price of DRAMs - manufacturers of the memory devices have seen prices fall for nearly two years, and have been forced to cut manufacturing and attempt to throttle supply. Earlier on this week, the Taiwanese government took extraordinary steps to bail out its home grown DRAM manufacturers, including extending the period of credit.

In the US again, National Semiconductor, based like Intel and Applied in Santa Clara, said it will lay off 300 jobs as the global business atmosphere turns into freezing fog.

Intel has been here before, and so far it hasn't made any job cuts, but is taking preliminary steps to lower costs, such as stopping hiring.

The fallout won't stop with the majors of the semiconductor business like Intel. Linked to all the big corporations is an extensive network of suppliers, all of which are likely to suffer because of retrenchments in the market. And customers of the semiconductor companies will also take a hit.  If an Intel is forecasting shortfalls in its core business - making X86 semiconductors - that means that multinational customers like Dell and Hewlett Packard and the rest must be wondering when the toxins radiate into their space.

And the lack of confidence generally in the business sector means that the channel, the distributors, dealers and retailers that bring electronics goods to market, will be wondering about the impact this will have on their businesses. Already, this week, we've seen Circuit City go into Chapter 11 and Best Buy showing jitters at lack of sales.  Everyone's nervous in every sector and no-one wants to give credit. Cash is king, for a while at least. X