US technology firm Intel is to close its last existing Silicon Valley manufacturing facility in a cost- cutting measure which has prompted fears for investment in the US technology industry.

Chip-maker Intel is planning closures affecting five facilities in the US and Asia. This follows a decline in demand for computer chips from software manufacturers, who are scaling back production in anticipation of a slump in consumer and corporate computer demand.

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The company will close two US facilities that make large discs from which processor chips are cut, as well as three assembly and test facilities in Asia.

Foreign capital-backed technology projects in the US decreased by 10.19% from 2007 to 2008, according to greenfield investment data from fDi Intelligence. Added to unprecedented corporate cost-cutting efforts within the sector, the lack of investment is likely to affect future R&D capacity in the US.

A report issued in January by the Battelle Memorial Institute, a US non-profit organisation which carries out scientific research for the government and industry, found that after a decade of consistent increases, US R&D investment is set to fall next year as corporations and the federal government will be obliged to cut costs. This is despite the US’s position as highest global spender on R&D at 34% of the global total. The study also found China and India to be in a strong position as they continue to increase spending on R&D.

According to fDi Intelligence, California remains the state which attracted the most inward investment into technology in 2008, with New York attracting about half as many projects, and Massachusetts and Texas following.

Another industry bellwether is the announcement by software giant Microsoft that it is planning company-wide job cuts for the first time in its 34-year history. The job losses may reach 5000.

At a time when unemployment figures in the US are predicted to hit 8% by the end of the year, a decline in the technology sector, which has long been seen as an engine of job creation, could have devastating effects. Jobs created by greenfield technology investment in 2008 reached 4969, exceeding the number of jobs created in the automotive industry, which is currently in decline but has historically been the biggest job-creating sector according to fDi Intelligence statistics gathered since 2003.

Signs of positivity within the industry, however, include yearly results from Google, Apple and IBM, which all bucked the downward trend.