A week after IDA Ireland announced a record set of job creation figures for 2000, the euphoria has been punctured by a spate of job losses in the high-tech sector.

Nearly 700 jobs have been lost in the past two days and an announcement by Gateway that it is shedding 10 per cent of staff worldwide to cut costs has shown that the high-tech sector is not immune to trends in the wider global economy. The economic slowdown in the US, which some experts fear could become a recession, has prompted a host of profit warnings and is forcing multinationals to seek rapid costcutting measures.

With about 72,000 people employed in the domestic technology sector and Government policy focused on promoting Ireland as an ecommerce hub, both multinational and domestic firms are sure to feel the pain.

Gateway was one of the first of the Irish-based PC makers to warn that sales were surprisingly weak at the start of the Christmas shopping period last month. Its earnings statement released on Thursday said sales had not picked up during December. Fourth-quarter PC sales fell some 15 per cent year-on-year and the firm warned of continuing deterioration in worldwide PC demand.

Analysts have focused on high PC penetration rates in the US and growing fears of a US recession as the primary reasons behind the severe slump in demand for computers.

Gateway's troubles have been mirrored in similar profit warnings from almost all the other major PC makers and the sector is certain to face a turbulent 2001.

This will have implications for the Republic, which is a European base for Apple Computer, Gateway, Hewlett-Packard, IBM and Dell.

Hewlett-Packard followed Gateway's announcement with its own profits warning this week. The company cited a tough economic environment and weaker-than-expected demand for its personal and business products.

Although a Hewlett-Packard Ireland spokeswoman said yesterday the warning would not have a "major impact" on Ireland, she admitted the organisation would seek to cut discretionary spending.

Further pain will be felt as PC hardware makers' profit margins are squeezed this year as they are forced to cut prices to encourage consumer demand. In the run-up to Christmas in the US, Dell cut prices on its Latitude notebooks by as much as 20 per cent while Gateway cut the price of entry level desk-tops.

Some analysts believe demand in Europe will not slow as quickly as in the US, which may cushion Irish operations shipping PCs to the European market.

"The market in the US is saturated but in most of southern Europe and areas of northern Europe there are still a lot of first-time buyers," says Ms Rita Sfier, research analyst with technology consultancy IDC.

However, the woes of PC makers will not be felt in isolation. Other sectors of the technology industry are hurting with the fall in value of the Nasdaq and weakening demand for technology. The silicon chip maker Intel has warned of slower growth in sales, in part due to the fall-off in demand for PCs worldwide. The company recently announced a delay in an expansion at its operation in Leixlip, Co Kildare.

And the US-based communications company Motorola said last month it would lay off 750 staff at its plant in Swords, Co Dublin, as part of a restructuring.

Although IDA Ireland said the Gateway announcement was disappointing, it added that it would ease problems of staff retention and turnover in the sector. None the less, the agency must be hoping for signs of stability from the US economy.

"Ireland is heading for a certain amount of slowing down but this is from an exceptionally high growth rate," said a spokesman.

Uncertainty in the technology sector is also hitting indigenous hightech firms. The Dublin-based web consultancy Oniva and Internet bank First-e have already introduced cost-cutting plans leading to significant job cuts.

And cost-cutting plans by multinationals inevitably have a knock-on impact on indigenous supply firms and the services sector.

There are about 12,000 people directly employed in supplying components to the electronics industry, says Mr Tom Kennedy, manager of electronics linkages at Enterprise Ireland and IDA Ireland. "A reduction in employment at Gateway is unlikely to have a major impact," he says, "but any move by a Dell, which is situated in a region, would be different."