LAS VEGAS - TOP technology companies came to Las Vegas to show off their latest innovations in consumer electronics, but despite the plethora of TVs, computers, phones, cameras and other gadgets on display, it was clear the industry is bracing for a very tough year.

While there were a few bright spots at this year's subdued Consumer Electronics Show - such as low-cost mini-laptops known as netbooks - what emerged was a picture of scaled-back investment plans, more job cuts and stagnant growth with no signs of improvement.

The global economic slump hit at a time when the growth momentum of flat-screen TVs and digital cameras, which drove the sector's expansion in recent years, had already started to lose steam amid high penetration rates in developed countries.

That left tech firms with no star products to fall back on.

Asked when the electronics industry was likely to recover from the downturn, Mr Shutoku Watanabe, executive vice president of Hitachi Ltd's consumer business group, said: 'I wish you could tell me.'

'We'd probably better mentally prepare ourselves for two more years of this,' he told Reuters in an interview, in which he said Hitachi was likely to miss its annual LCD TV sales target by as much as 10 per cent .

According to estimates from industry watchers IDC, Gartner and DisplaySearch, the global PC, microchip and flat-TV markets will all contract in 2009 in value terms as the protracted economic downturn dampens consumer and corporate spending.

'I don't think there is any one product that is going to help everybody pull out of the situation,' said DisplaySearch analyst Chris Crotty, who attended the show ending on Sunday, where high-tech companies from Microsoft Corp to Palm Inc unveiled their latest products and strategies.

'Unfortunately, when you have an economic downturn coupled with slowing demand, it's a combination that weakens the industry,' Mr Crotty said.

Before CES, a slew of technology companies had already announced sweeping job cuts: chip maker Micron Technology Inc said in October it would cut 15 percent of its global workforce of about 19,000 people, while Sony Corp plans to eliminate 16,000 jobs and reduce its network of 57 manufacturing sites by five or six.

At CES, a senior executive at Seagate Technology said the world's largest hard-disk drive maker plans to cut around 10 per cent of its US workforce, amid sluggish demand for PCs and other electronic products.

'We are preparing for a pretty tough environment here over the next 12 months' said Mr Brian Dexheimer, president of Seagate's consumer division, joining a growing list of high-tech companies that are reducing headcount to save costs.

Drastic steps
The steep slowdown in tech demand hit manufacturers just when they were accelerating output expansion, and now they are scrambling to cancel or downscale aggressive investment plans.

While some companies such as LG Electronics Inc said it was important to continue to innovate and invest in research and development during a downturn, analysts do not expect any large-scale spending by tech companies this year.

Panasonic Corp , the world's largest plasma TV maker, said it would cut its capital spending on its new plasma and LCD panel plants by 23 percent to 445 billion yen.

Mizuho Securities analyst Ryosuke Katsura said, however, more drastic measures than shutting factories or postponing expansion plans may be needed to cope with current oversupply.

In ordinary times, companies cut prices to spur demand and clear inventory. But the credit crunch is making it impossible for potential customers to purchase big-ticket items, such as flat TVs, regardless of price cuts, Mr Katsura said.

'In the medium term, like 2010 or 2011, there's going to be some room for growth. But in 2009, we've got this supply/demand imbalance. Only after consolidation among manufacturers will the industry will be ready to start growing again,' he said.

Samsung Electronics Co Ltd last year made a nearly $6 billion proposal to buy rival flash memory maker SanDisk Corp .

But the South Korean company, which rules a memory chip industry suffering from overcapacity and weak demand, later withdrew the bid, citing the U.S. firm's deepening losses and uncertain outlook.

Bright spots
In an otherwise somber industry, there was some buzz around products such as low-margin netbooks , 3-D television , Web TV , a new phone from Palm and high-definition Blu-ray players and video recorders.

Netbooks, designed for simple computing tasks like Web browsing and email, were pioneered by companies like Asustek in 2007. The Taiwanese company aims to sell 7 million netbooks in 2009, up from about 5 million a year earlier, Asustek Chairman Jonney Shih said .

Demand for Blu-ray machines has been picking up since last year, when Toshiba Corp gave up on its HD-DVD format, allowing the entertainment industry to back a rival optical disc format developed by the Sony-led Blu-ray camp. -- REUTERS