"Given the sustained weakness of the market, Siemens Mobile... intends to take steps to increase its productivity," the group said.

That means cost cuts, and involves getting rid of 2,300 employees - 500 of them in Germany - by the end of the firm's financial next year in September 2004. No details were available of where else jobs would be going.

The layoffs are part of a $1.1bn cost cutting package. Some 2,000 jobs have already gone in each of the past two years, leaving a current workforce of about 28,000.

Shrinking market

Siemens said it was making the job cuts as part of responsible long term planning.

"The world market for mobile communication networks had already declined by 15% last year. This year, the market will contract by up to 20%," Siemens said.

Futhermore, while sales of mobile phones continue to grow, they are doing so more slowly, Siemens said.

Mobile phone makers worldwide have had trouble with a market that is moving from fresh users to upgrades of existing subscribers' phones, and have also suffered as operators concentrate more on sweating more money out of existing customers than on signing up new ones.

The combination means an overall market shrinkage which could reach 20% this year.

Siemens' mobile phone business ranks in the world's top four, but it has been struggling with price cuts and competition from Asian manufacturers.

Its chief executive, Heinrich von Pierer, has also acknowledged that it has lacked attractive new handsets in comparison to rivals such as Motorola, Samsung and Nokia.

As well as handsets, it makes network infrastructure for mobile telecoms providers.