Professor John Andrews, chief executive of the Further Education Funding Council for Wales, told a conference of principals that some colleges had cut cash for staff development to 0.1 per cent of their budgets.
"Reductions in this area will severely handicap colleges' ability to offer the quality provision needed to ensure a highly-skilled workforce," he said.
The FEFCW has commissioned research into the equipment in use at Welsh FE colleges, and how it compares to that of industry.
Professor Andrews said: "Many colleges are setting aside funds, or have obtained support from training and enterprise councils, in order to train staff in the use of the new, hi-tech equipment. It would be a retrograde step if institutions were to fail to ensure that lecturers are kept updated so that they deliver relevant training."
The Fforwm of Welsh colleges heard that skills shortages could limit hi-tech investment in Wales.
Colleges and training agencies are currently grappling with the demand for skilled labour posed by South Korean industrial giant LG, which is investing Pounds 1.7 billion in a TV monitor and silicon chip plant in South Wales - Britain's biggest ever inward investment deal.
The FEFCW has developed a database of training in colleges to mirror one already compiled by the Welsh Development Agency to promote the principality's colleges to potential investors from abroad.
But Professor Andrews warned national targets for training would be hard to meet. "We need a very hard push from Ministers, trade unions and employer organisations if we are to crack this challenge."
Elizabeth Haywood, director of the Confederation of British Industry in Wales, said expansion in industrial training was needed to avoid skills shortages.
She stressed that training was essential to cope with the principality's fast-changing economy.
She said: "The Welsh economy is going to need lots of different skills, some of which are easier to produce than others. In a survey we carried out for the Business Agenda for Wales, we identified a particular problem with the availability of vocational technical level skills.
"This problem is unsurprising in the context of past demand only for unskilled or semi-skilled operatives, but urgently requires a concerted planning effort by all the economic actors.
Sony and Panasonic have publicly raised the issue of recruitment problems for engineers and technicians resulting from strong competition from other manufacturers.
"I think we can forecast with some certainty that this situation is not going to ease as we move into the next millennium without a serious injection of effort at all levels," she said.