UPDATE 4-ASML slashes outlook, jobs in severe order slump

* Q4 sales outlook cut to 450-500 mln euros

* Sees substantially lower sales in H1 2009

* To cut workforce by more than 10 pct

* Shares up 0.6 pct

(Adds analyst comment, updates shares)

By Harro ten Wolde

AMSTERDAM, Dec 18 (Reuters) - The biggest-ever drop in demand for its chip making equipment forced ASML NV (ASML.AS) to lower its outlook and cut more than 10 percent of its workforce, hitting shares by as much as 13 percent on Thursday.

ASML's travails follow bad news for chipmakers in Asia and elsewhere as prices for memory chips, used mainly in personal computers and consumer electronics, slump to all-time lows as supply outstrips demand. [ID:nLG53560] "Never before have we witnessed such a sharp and sudden fall-off in lithography system demand, triggered by an unprecedented mix of falling end-demand for semiconductors, weak memory prices and restricted access to capital for our customers," ASML (ASML.O) Chief Executive Eric Meurice said in a statement.

Fourth-quarter revenue is now seen at 450 million to 500 million euros, below the 530 million euro ($743 million) forecast issued in October. ASML also expects revenue in the first six months of 2009 to be substantially lower. [ID:nWEA9779].

ASML shares dropped as much as 13 percent in early trade, but recovered to trade 0.6 percent higher at 12.04 euros by 1518 GMT after Goldman Sachs upgraded the stock to "buy" from "neutral".

"Management (is) finally recognizing current conditions in today's profit warning," analyst Simon Schafer said in a note, adding that he expected industry fundamentals to stabilise, albeit at a very low base.

The DJ Stoxx technology index .SX8P was flat. Since the start of the year, ASML shares have fallen 50 percent, in line with the index.

2009 LOSS SEEN

"This is unprecedented ... no business model can cope with this kind of climate," said Petercam analyst Eric de Graaf, who has a "sell" rating on ASML.

De Graaf noted that the Veldhoven-based company's first-quarter revenue forecast of 180 million to 250 million euros implied sales of just three of its advanced lithography machines, given that ASML receives about 100 million euros of service revenue a quarter.

JP Morgan analyst Sandeep Deshpande said he now expected ASML to be loss-making in 2009, also on a cash basis.

ASML's customers are grappling with oversupply, falling memory prices and pressure to consolidate. Another problem is the increasing difficulty in finding financing for ASML's machines that can cost as much as 30 million euros apiece. [ID:nLG728111].

Hynix Semiconductor (000660.KS), the world's No. 2 memory chip maker, said earlier on Thursday that it was planning to cut its production of computer memory chips by 20 to 30 percent starting in late December. [ID:nSEO247756].

The Semiconductor Equipment Association of Japan said on Wednesday that orders for Japanese equipment used to make semiconductors tumbled 71 percent in November, marking the 21st straight month of year-on-year declines. [ID:nT223191]

ASML said it will shut down production facilities for four weeks, spread over the first and second quarter of 2009.

The company's main rivals in semiconductor lithography machines are Japan's Nikon Corp (7731.T) and Canon Inc (7751.T), but lithography makes up only a small part of the competitors' activities. ($1=.7137 euros) (Editing by Mike Nesbit and Simon Jessop)