UPDATE 3-National Semi to cut a quarter of workforce

* To cut 1,725 jobs, or 26 pct of workforce

* Fiscal Q3 EPS 9 cents vs 29 cents year earlier

* Q3 rev falls 36 pct to $292 mln, Wall St view $295 mln

* Shares down more than 2 pct in afternoon trading
(Recasts first sentence, adds Reuters Estimates, industry
comment, updates shares)

BOSTON, March 11 Reuters) - National Semiconductor Corp
(NSM.N) plans to cut 26 percent of its workforce, or 1,725 jobs
worldwide, in the latest sign of distress in a global chip
industry roiled by plummeting demand for PCs, cellphones and
other electronics.

The company, whose chips are used in a range of industries
from automobiles to cellphones to aerospace and power
management, also gave a revenue forecast that was below Wall
Street expectations, after reporting sharply lower quarterly
results on Wednesday.

National Semiconductor, which currently employs 6,500
people, said it will immediately cut 850 jobs worldwide in
product lines, sales and marketing, manufacturing and support.

The company also intends to close two of its five plants --
an assembly and test facility in Suzhou, China, and its wafer
fabrication plant in Arlington, Texas -- which would result in
another 875 jobs lost over several quarters.

"Without a doubt, people are probably going to question
whether a workforce reduction that large is going to hamper
their ability to service their market," said Broadpoint AmTech
analyst Doug Freedman.

National Semiconductor shares fell 2.48 percent to $11.41
in afternoon trading on the New York Stock Exchange, having
lost half their value since hitting $24.75 in June 2008.

The cuts will cost the company $160 million to $180 million
in severance and other charges, of which it said it expected
$130 million to $145 million to be recorded in the current
quarter.

The company expects to save $120 million annually from these
cuts plus the 330 layoffs it announced in November, according to
a spokesman.

National Semiconductor is one of many companies in the chip
industry -- from Intel Corp (INTC.O) to Marvell Technology
(MRVL.O) -- that is cutting jobs, closing plants and idling
production lines to save costs in the economic downturn.

"We do think this will be a down year," Semiconductor
Industry Association President George Scalise said at a media
roundtable in Washington, D.C.

At the same event, Intel Chairman Craig Barrett told Reuters
that cutting costs was not enough, and that it was important to
invest in research and development in a downturn.

"If you're interested in the long-term view, look at R&D
spending," he said in an interview. "You don't save your way out
of a recession, you invest your way out of a recession."

NEW PRODUCT AREAS

National Semiconductor executives said on a conference call
that they were planning to move resources into new product
areas, including solar energy, laptop computer screen lighting
and power-saving LED lighting.

Chief Operating Officer Donald Macleod said new chip orders
from the company's seven biggest mobile handset customers grew
20 percent during the quarter, a sign that "efforts to clean up
supply chain appeared to be pretty much behind them."

Net profit fell to $21.1 million, or 9 cents per share, for
the fiscal third quarter that ended March 1, compared with $72.9
million, or 29 cents per share a year earlier.

Excluding an $11 million tax benefit, profit was 4 cents
per share, better than the average analyst forecast for a loss
per share of 4 cents, according to Reuters Estimates.

Quarterly revenue fell 36 percent to $292 million, while
gross margin dropped to 57.5 percent from 64.3 percent. Wall
Street was expecting revenue of $295 million.

National Semiconductor expects the closure of the two plants
to boost gross margin by 5 points, the spokesman said.

The company forecast current quarter sales to fall 5 to 10
percent from the third quarter, which translates to sales of
about $263 million to $277 million. Analysts had forecast $293
million, according to Reuters Estimates.
(Reporting by Jim Finkle in Boston and Diane Bartz in
Washington, writing by Tiffany Wu, editing by Matthew Lewis)