Reluctant US shoppers look certain to be tempted by big bargains this holiday season with 32-inch LCD televisions going for $400, small laptop computers for $300 and 8-megapixel digital cameras for $100.

Buyers of digital gadgets have learnt they can always expect to get more for less as deflation is built into the business model of the consumer electronics industry, as components become cheaper and more powerful.

But the bargains that are expected to hit the stores and electronics websites in the coming weeks, however, are the result of deflationary pressures that are far more severe than usual.

They point to a downturn that is already convulsing the global supply chain of the electronics industry, and which is forecast to break out next year into a full-blown recession for some of the largest digital industries, led by PCs and mobile phones.

As usual, it is the component makers who are feeling the first wrenching effects of this adjustment. With manufacturers of consumer electronics and computers slashing their inventories and reducing production runs, demand for the semiconductors that comprise the main building block of the digital age has fallen sharply.

That was apparent last week when Intel, whose chips are used in more than 80 per cent of all PCs, issued a shocking warning that sales will decline some 12 per cent this quarter, compared with the 3 per cent growth it had forecast only four weeks before.

While Intel's warning has been the most visible sign of the rapid deterioration, a far broader supply chain has been hit.

This week, Corning, the US company that is the largest maker of the glass used in flat-panel computer monitors and LCD televisions, said things had got so bad it could no longer offer financial forecasts for this quarter, let alone next year.

The slump has wiped 70 per cent from Corning's share price in the past five months.

In the short term, the collapse in the pricing power of component makers is good news for electronics and technology companies. When Dell, the world's second-biggest PC maker, reports earnings today, its profit margins are expected to get some support from the lower costs.

Yet this silver lining will do little to distract from the dark cloud that hangs over the company. With a heavy reliance on US sales, particularly large companies that are usually the first to delay new PC purchases when times get tough, Dell is expected to give an early clue as to how quickly the pain is spreading to the PC business. Dell's shares are off 70 per cent from their high of a year ago.

For buyers of PCs, mobile phones and the wide array of digital consumer electronics, the signs of this industry crunch will be apparent in the stores by next week, with the official launch of the US holiday shopping season on "Black Friday".

Rumours abound that heavily discounted products, including a $399 LCD television, which cost hundreds of dollars more a few months ago, will hit the shelves - a move that will highlight the intensity of the downturn.

Next year, a full-scale recession is expected to take hold. Analysts and industry forecasters have been rapidly cutting projections, trying to anticipate just how far consumer and corporate demand will fall.

The SIA pointed to a forecast that the number of PCs sold around the world next year will be 5 per cent lower than this year, while mobile phone sales will fall 6.5 per cent - the first decline in these markets since 2001.

With average selling prices falling fast, the overall outlook is even worse that these numbers suggest. According to a forecast from Citigroup, the PC industry is set to shrink by more than 10 per cent in revenue terms next year.

The decline will not be across the board, however, with wholesale shifts to some new products helping some categories of electronics to continue to grow.

The PC market, for, instance, is going through a big shift as buyers switch to portable machines.

"Desktops are going to suffer, though we still expect notebook [growth] rates to be positive, only at a lower rate," said Bob O'Donnell, an analyst at IDC.

Also, the new category of small, low-priced laptops, known as "netbooks", is still set to be a hit with consumers this Christmas, in spite of wider problems, he added.

Similarly, a move to flat-panel TVs is still fuelling heavy growth in sales of those machines, even if it will be less than previously expected, and will be offset by a collapse in demand for other types of TVs.

So far this year, unit sales of flat panel sets have risen 40 per cent, said Tim Herbert, director of market research at the Consumer Electronics Association.