Intel has frozen salaries of employees across the company, including top executives, in an effort to reduce spending and control costs.

The salary freeze comes as Intel tries to cope with reduced chip demand as the recession wears on. The salary freeze applies for every employee, including CEO Paul Otellini, said Chuck Mulloy, an Intel spokesman.

"We are in the toughest recession in the history of our industry and we need to continue to control our costs," Mulloy said.

A salary freeze for Otellini and other top executives has to be approved by shareholders, according to a filing with the U.S. Securities and Exchange Commission on Monday.

Intel also said it planned to reimburse employees who have lost value on their stock options, according to the SEC filing. The company later this year will allow employees to receive new stock options in lieu of the previous outstanding stock options that went below the exercise price at the end of 2008.

The company's common stock price closed at $14.18 on 26 December, resulting in more than 99 per cent of Intel stock going below the exercise price. The company saw its fourth-quarter profit in 2008 drop 90 per cent from the year earlier as the chip maker battled reduced chip demand.

Revamping the stock option plan was important for Intel to attract and retain top talent who are critical to the company's long-term success, according to the filing. Intel had 83,900 employees as of December 27, 2008, and 87 per cent of employees currently hold stock options.

The moves come as Intel tries to take further corrective action to pull itself out of the economic hole. Semiconductor companies are seeing lower chip orders as demand for products like PCs continues to slow down. That has led to factories being underutilized, which is a cost burden for semiconductor companies.

Intel in January cut 6,000 jobs and said it would close four manufacturing and test facilities in Malaysia, the Philippines and the US.

At the same time, Intel last month said it would spend $7 billion over the next two years to revamp three US manufacturing plants.