Microchip Technology, which employs about 400 at its Gresham fab, warned that third-quarter sales totaled about $546 million, well below the $560 million to $576 million the company had forecast. The company said that September sales were unusually weak, driven by poor sales in China.

Though Microchip is relatively small (with a market value around $8 billion), its results sent a shudder through the entire industry.

The chip industry is notoriously cyclical, moving like a sine wave. Years of good news gradually give way to a sustained down stretch. And Microchip's chief executive, Steve Sanghi, suggested that the poor September results could be an ill omen for his company and many others.

"Microchip often sees the turn of the industry ahead of others in the semiconductor industry," Sanghi said in a written statement. His company reports its distributors' sales, meaning that Microchip's results are more reflective of what's going on at any given moment because there's no lag between the company's sales and what distributors are finding.

"We believe that another industry correction has begun and that this correction will be seen more broadly across the industry in the near future," Sanghi wrote. "While we are reducing our production levels in our wafer fabs and assembly and test facilities, we are continuing to ramp production on our new technologies where we have been capacity constrained."

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