Worldwide PC shipments are expected to plunge this year to 257 million units, a drop of 11.9 percent - the biggest ever in the industry, according to a new report. Mobile phone sales are also declining.

"This is going to be a tough time for the industry," said George Shiffler, a research director at Gartner in San Jose, which released the report Monday. "It's grit your teeth and gut your way out."

Both emerging and mature markets are affected, which is especially bad news for Silicon Valley because emerging markets have been a growth engine for technology companies, even as their sales slowed in the United States and the rest of the developed world.

MBA BY THE BAY: See how an MBA could change your life with SFGATE's interactive directory of Bay Area programs.

Shipments of mobile PCs are expected to grow 9 percent this year to 155.6 million units, Gartner said, but that's not enough to offset an expected decline in shipments of desktop PCs of 31.9 percent, caused because more people are hanging on to the computers they already have.

Gartner expects developed markets to decline by 13 percent this year, compared with a 7.9 percent decline in 2001 after the dot-com bubble burst. Emerging markets are expected to decline by 10.4 percent, compared with an 11.1 percent growth in 2002.

Mobile phone sales also declined in the fourth quarter, although they rose in 2008 overall, according to a report Gartner was to release today. PCs and mobile phones in turn have the biggest impact on global sales of semiconductors, which declined in January by 28.6 percent year over year and 11.9 percent since December, the Semiconductor Industry Association said.

This year's expected drop in PC sales is a combination of the recession and a quick reaction by companies in various parts of the PC supply chain, which have improved their technology for forecasting demand, Shiffler said. Whether they have cut inventory too much remains to be seen.

Still, the effects of Gartner's report are rippling throughout the technology industry.

Shares of Applied Materials, Intel, AMD, Hewlett-Packard, Microsoft and Dell all dropped on Monday, and a spokesman for Intel said the company expects more months of decline.

Intel has announced it will lay off 5,000 to 6,000 employees as part of the closure of several older factories in the United States and abroad, and the upgrading of four U.S. factories, on which the company proposes to spend $7 billion.

Also on Monday, Intel announced specialized processors for car entertainment systems, media phones, and industrial automation and control systems.

"We know it's challenging times, and we are continuing to try to control the business and also try the best we can to invest so we can come out stronger than when we went in," said Chuck Mulloy, an Intel spokesman.

Intel is better positioned than most companies to invest in the future because of its size, Shiffler said. "My question is, what happens to the others? Do they have resources, or access to credit?"

He expects the economy to improve in 2010 and 2011, he said, but it has to stop falling first.