SAN FRANCISCO -- Applied Materials (AMAT) - Get Report has made it as clear as possible for investors looking for signs of life in the semiconductor sector: This is the lowest level of investment in more than 15 years.

For Applied, that translated into a

first-quarter loss

of almost $133 million, due to a restructuring charge that reflected the company's first round of cost cuts undertaken in November.

It also means a starker reality about the future: The company said it plans to ultimately whack more than 2,000 of its employees, or 14% of its workforce, and that additional cuts are already under consideration.

By the end of its fiscal 2009, which ends in October, Applied said it aims to bring its quarterly revenue break-even level to below $1.2 billion, and its free cash flow break-even revenue level to about $1 billion.

Considering that in its full-year fiscal 2007 the company posted a profit of $1.7 billion on revenue of $9.7 billion, the magnitude of drop-off is fairly staggering.

The fun doesn't stop there: Applied will also continue to take multi-week shutdowns in many of its businesses, in both its second quarter and third quarter.

Yes, that's right, tech optimists -- rather than gearing up for that second-half rally, a leading chip equipment supplier plans to shut down operations into its July quarter.

To be fair, semiconductor equipment companies are further from the end-demand chain and thus have less visibility than their chipmaking customers, but do you really question the credibility of Applied CEO Mike Splinter, who told analysts that his "leading semiconductor customers say that the falloff in chip demand and pricing is the most severe they have ever experienced?"

Applied Materials shares, which slumped 4.4% during Tuesday's market meltdown, were off another 4 cents on Wednesday to $9.65.

Unfortunately, this week has already seen other bits of data that are no more reassuring. (Let's for the moment leave out

Intel's

(INTC) - Get Report

announcement that it plans to spend $7 billion over the next two years to build manufacturing facilities in the U.S. We're all in trouble if demand for chips hasn't improved in two years.)

Shares of graphics chipmaker

Nvidia

(NVDA) - Get Report

were tanking Wednesday -- off more than 13% -- as investors chose to ignore the company's somewhat relieving disclosure that first-quarter revenue would be flat to slightly higher than the company's fourth-quarter revenue -- perhaps because fourth-quarter revenue had fallen 60% from a year earlier.

Ultimately, investors will need more evidence that demand in chipmakers' primary end markets -- PCs and cellphones -- is again picking up. But it isn't -- a report on Wednesday from research firm IDC said fourth-quarter PC microprocessor shipments plunged 11.4% from a year earlier, and that further demand declines in the first quarter point to a "very poor" first half of the year.

(Interestingly, IDC said Intel's Atom chip for low-fi notebooks, so-called netbooks, made somewhat of a splash, relatively speaking. Excluding the Atom, PC chip shipments fell by more than 21% -- a telling trend for future PC-maker margins).

Similarly, a report by

DigiTimes

suggests that

Texas Instruments

(TXN) - Get Report

may look to shut down some of its phone handset-related fabs in March, according to Taiwan distributors who have allegedly been asked by TI to gauge their demand for the first and second quarter.

All of this is just more of the same for chip investors. The best companies are attractively valued -- Intel shares, now under $14, have fallen to a trailing-12-month price-to-earnings ratio of 15 -- but offer little hope to anyone without a long time horizon.The

Semiconductor HOLDRs

(SMH) - Get Report

exchange-traded fund, which had climbed more than 15% from late January through Monday, is now off more than 6% in the past two trading sessions. Its trading range of 20% or so over the past three months is likely the collar on all semiconductor-related stocks until further notice.