In addition to a wide range of semiconductors, TI makes DLP digital TV technology and a legendary line of calculators. Among the factors shaping the changed forecast is TI's expectation that resales by its distributors will fall 20 percent in the quarter. Within the company, average factory utilization will fall from more than 60 percent in the third quarter to the mid-40s.

TI had expected revenue to fall in the fourth quarter, but the reality has been far worse than expected. In response, the company has gone beyond earlier cost-cutting measures. On Monday it announced it is starting a voluntary retirement program and will temporarily idle many of its factories in late December and early in the first quarter. It has also suspended hiring.

In the first quarter, TI expects revenue to fall again from the fourth quarter, although not as steeply as it has from the third quarter, Slaymaker said.

"Conditions are likely to get worse before they get better," he said.

The announcement took place after the close of the New York Stock Exchange, where TI's shares (TXN) are traded. The stock was down $0.60 at $14.22 in after-hours trading late Monday, after rising $0.26 during the normal trading day. National Semiconductor (NSM) had fallen $0.65 to $9.64 in after-hours trading, and Altera (Nasdaq: ALTR) was down $0.09 to $13.95.