Intel Corporation, one of the State's largest high-tech employers, will seek up to 170 voluntary redundancies to cut costs at its Leixlip plant in Co Kildare.

The company, which employs 3,400 staff in the Republic, said last night it wanted to reduce its headcount by 5 per cent to meet "current business levels".

The job losses are the first at Intel which is considered a flagship Irish investment and will fuel fears of further job losses across the technology sector.

Intel manufactures the chips which power a range of electronic devices and its business is closely aligned with firms such as Dell and Gateway who have already reduced their workforces in the Republic this year.

An Intel spokesman said last night that the redundancies would be spread across different Intel divisions and all levels of the business including management.

He said the company did not expect further redundancies and believed these would be sufficient. But there are no guarantees in business, he added.

Staff who opt for voluntary redundancy will receive incentive packages varying between four months pay and 12 months pay.

The company will pay an additional £3,000 (#3,810) towards other benefits requested by employees such as travel and further education.

The job cuts follow the introduction of a range of cost-cutting measures at the firm designed to maintain profits amid a global slump in demand for computer chips.

Intel halted construction of a $2 billion extension to the Leixlip plant last March and has offered its staff the opportunity to take two weeks additional unpaid leave.

The company has also confirmed that its six-monthly staff bonus would be halved and that it had considered a temporary closure of up to three weeks for its Leixlip plant.

Along with most other microprocessor firms worldwide, Intel has been hit hard by a continued slump in demand for computer chips since last November.

Recent figures provided by the Semiconductor Industry Association said chip sales of $12.7 billion in May had slipped 20 per cent from a year ago and were 7.3 per cent off April sales of $13.7 billion.

Media reports yesterday said Japan's five chipmaking conglomerates will spend 20 percent less on capital investment in semiconductors than they targeted at the start of the business year in April.

Earlier this week Intel unveiled profits of $854 million (#1 billion) for the three months to the end of June.

This figure represented a fall of 76 per cent on the same quarter last year and 22 per cent on the first quarter of this year.

Sales were $6.3 billion during the quarter, down 24 per cent on the second quarter of 2000 and 5 per cent on the first quarter of this year.

Intel also admitted there is still little visibility about when an upturn would occur in the economy.

However, an Intel spokesman said last night that the firm remained committed to its $2 billion expansion at Leixlip.

"We're still very confident about the long-term business and that we will build Fab 24," he said. "We're still on track to restart construction early next year."

Meanwhile, Dell said yesterday that a combination of new products and economic factors should help boost computer demand in a few months.

Dell Computer, which earlier this year announced it was laying off 6,000 employees amid a brutal price war in the PC market, said more job cuts were unlikely if the national economy does not worsen. The company employs almost 6,000 people in Ireland.

Dell chairman, Mr Michael Dell said he expected economic activity to pick up later in the year, but warned that the current climate of uncertainty made forecasting difficult.

Dell said it expected revenues of $7.6 billion and earnings per share of 16 cents in the second quarter, both in line with previous guidance. Official results will be announced next month.