Intel yesterday scaled back its $2.2 billion expansion at Leixlip, Co Kildare, to counter difficulties in its global markets.
About 1,400 construction workers will lose their jobs on the site of its Fab 24 project, in a development seen as the clearest indication yet that a slowdown in the US economy could have a serious impact in the Republic.
Intel said it was committed to the project, which would be "accelerated" again next year. It is understood to be seeking savings of $200 million this year through the postponement.
Construction unions are expected to demand "comfort payments", firm dates for a resumption of work and guarantees that existing employees will be given first choice of jobs.
Intel and its sub-contractors already employ 4,900 permanent staff at an operation ranking among the biggest investments by high-tech multinationals in the State. Its chips are used as standard technology by IT firms, so the company is seen as a proxy for the sector.
In a statement it said workers who resigned in the coming months would not be replaced. While this follows a profit warning last Friday that predicted 5,000 departures from its global workforce of 85,000, Intel claimed it still wanted to employ an additional 1,000 people at the new Dublin plant.
Following yesterday's second postponement, that plant is not now expected to produce chips until mid-2003. Three months ago Intel pushed back its production target to the second half of 2002 from late 2001.
When the project was sanctioned last June, its spokesman said the implications of non-completion by late this year would be "unthinkable". However, falling demand for computer chips and fears of recession in the US have weakened its performance in a market damaged by depressed stock prices.
The company's vice-president for communications, Mr Chuck Molloy, said "the current economic climate is a contributing factor" in the postponement. However, speaking from Intel's headquarters at Santa Clara, he said the delay was "normal".
Intel had four factories under construction and Ireland would be the first to use new 0.10 micron technology, Mr Molloy said. The company would not cut spending on new plant and equipment and previous plans to spend $7.5 billion to expand production and implement new technologies remained unchanged, he added.
An IDA Ireland spokesman in San Jose said a delegation from the jobs agency would visit Intel in Santa Clara next week. It attributed the news to the general retrenchment in the technology sector. "Intel has been hit like everyone else," he said.
Intel's director of sales and marketing, Mr Sean Maloney, said telecommunications companies had cancelled large orders, reflecting a slowdown in the sale of mobile phones. He told analysts the US slowdown was spreading overseas, with order cancellations coming from all over.