Startup chipmaker Transmeta has been hit hard by the slowdown in the economy and has issued a warning that its latest quarterly sales will barely be half that of the first three months of the year.

After predicting in April that sales for the three months to the end of June would remain solid, or rise a little, Transmeta reported yesterday [Wednesday] that it expected sales to be 40-45 per cent lower than for the three months to the end of March.

It will also take a charge as it moves to 0.13 micron processing, a manufacturing technique that will help it make smaller and faster chips.

The firm is launching a new range of low-battery-power consuming laptop chips at the end of June that are capable of speeds of 1Ghz.

Analysts called the warning "unbelievable" and said Transmeta was being trampled on all sides.