Two workers from the Futjitsu factory: 'Everybody there has got a mortgage'

Workers leaving the plant at Newton Aycliffe in County Durham were told on Friday morning with the company confirming later that production will cease immediately with the factory to shut in December.

The factory is in the constituency of Prime Minister Tony Blair who said he was "saddened" by the closure and would visit the plant to talk to workers and management.

Prime Minister Tony Blair: 'We will do all we can'

Meanwhile, his Secretary of State for Trade and Industry, Peter Mandelson, has announced a £100m package to boost investment in the north-east.

Semiconductor prices have collapsed

He said the package includes support for Fujitsu's attempts to sell the plant to a new owner and help for redundant Fujitsu workers. The measures will will tie in with the region's long-term regeneration strategy.

Real Video: North of England Correspondent Mike McKay sees how the workers will be affected

Takamitsu Tsuchimoto, head of Fujitsu's electronic devices group said: "We would like to stress that the decision was in no way influenced by the economic climate in the UK, the critical issue at Newton Aycliffe was the state of the market internationally."

The factory will be mothballed from early December while a buyer is sought.

Earlier this year Fujitsu had announced that it would suspend the production of memory chips - D-Rams - at the plant in the year 2000, and might abandon this business altogether.

3,000 Northern jobs gone

Hugh Morgan-Williams of the CBI: 'We have seen a significant loss of jobs in the region'

Hugh Morgan-Williams, northern region chairman of the Confederation of British Industry, said the closure would be a big blow for the region.

"If this true, it will mean we have lost 3,000 jobs in August and early September and they're just the large ones. We have also seen numerous losses of 200 to 300 which have not made the headlines over the past two or three months."

Siemens also closes North plant

He said a comparison of UK labour costs with elsewhere at the moment shows that it is high value of the pound that is causing these closures.

Union leaders have said they will press the prime minister to set up a special task force to attack the unemployment fallout from the downturn in manufacturing.

Two workers from the Futjitsu factory: 'Everybody there has got a mortgage'

Roger Lyons, general secretary of the Manufacturing Science and Finance Union will meet with Mr Blair on Monday seeking union, governmnet and employer input to stem rapid job losses over recent months.

The company invested £350m ($580m) into the plant which opened in 1991 employing 570 staff.

Fujitsu has seven plants in the UK, its largest investment outside Japan.

Job toll

Last month the German electronics firm Siemens announced that it would close down its semiconductor factory near Tyneside, with a loss of 1,100 jobs.

On Thursday, the US chip maker Motorola confirmed that it plans to shed 150-200 staff at its East Kilbride factory near Glasgow.

Motorola employs 1,800 people in two plants there, which are going to be merged.

Tony Joyce, Motorola's UK director of communications, said: "The chip prices are falling all the time. The problem with the Far East market means that not only have the markets that we used to sell into reduced, but also customers are buying what's available at cheaper prices than we can compete with."

Meanwhile, thousands of new jobs could be at risk following the decision by two of South Korea's leading conglomerates, Hyundai and LG, to merge their computer chip businesses.