San Francisco - The season of good cheer is bringing gloom this year even to the perennial bright spot of the US economy - the high-tech business wonderland of Silicon Valley.

Stalwarts like Hewlett Packard, Advanced Micro Devices and Cisco are shutting down for extensive Christmas vacations for the first time ever as they try to conserve cash in the face of a global downturn. From China to India, many of the customers that in the past helped the technology industry through tough times in the US are also feeling the pinch, forcing Silicon Valley to institute the unprecedented worker furloughs.

While a nice Christmas holiday could be seen as a welcome escape for many employees in these troubled economic times, some will pay dearly for the 10-day break that began Monday and will continue past New Year's Day. Because US employees only get an average of 10 days paid vacation a year, many workers will find themselves taking unpaid leave over the vacation period because they have already used up their measly holiday quota.

Still, cutting back a bit over the festive season is vastly preferable than the other alternatives in the current recession.

The economic storm has already produced major layoffs at Sun Microsystems, Yahoo, Adobe Systems, Hewlett-Packard, eBay and Advanced Micro Devices. Even mighty Google has cut back on hiring and trimmed its legendary perks as the online advertising market contracts.

Apple, that other trendy titan of Silicon Valley innovation, is also suffering. According to analyst firm NPD Group, Apple posted flat year-over-year US sales in November for Macs, even as sales of rival Microsoft Corp's Windows PCs rose 7 per cent.

But it is the wider demand for the tech products at the core of Silicon Valley that is most keeping executives up at night. Earlier this month, SEMI, the industry trade group, predicted a 21-per-cent decline next year in semiconductor equipment sales, following a 28- per-cent decline this year.

Last week, research firm IDC predicted a 1.9-per-cent decline in global sales of cellphones, the first such drop since the global recession sparked by the dot-com bust of 2001.

Economist Luke Tilley if the economic forecasting company Global Insight expects Silicon Valley to shed 26,000 jobs and post a negative 1.5-per-cent growth rate next year as its products become more expensive for foreign buyers because of the stronger dollar, just when those economies are struggling with the global recession.

Disconcerting as that may be, it doesn't even come close to the more than 200,000 jobs that were lost in the tech industry following the dot-com bust. In fact, say economists, the caution taught by that episode is one of the reasons that the current downturn may just be a cyclical blip in the region's boom and bust economic history.

"We didn't go crazy this time. We didn't finance 10 startups where two were justified, and we didn't build 10 buildings where two were justified," says economic forecaster Richard Carlson.

Some are already spying the seed of the next boom in the scores of high-tech, green energy companies that are sprouting up amid the rows of traditional chip makers and software mills. They say that US president-elect Barack Obama's plans to promote green energy could give the Valley the shot in the arm it needs to power the US economy again.

"Toward the middle to the end of the year, we will see more evidence of investments in alternative energy," said Stephen Levy of the Centre for Continuing Study of the California Economy. "It will be a sign we are participating in the future growth of the economy. We're well-positioned on the upturn, but we won't avoid the downturn."