Intel Corp. announced Monday it will build a $2.5 billion chip factory in China, giving the U.S. company a bigger presence in the booming Chinese market and boosting Beijing's efforts to attract high-tech investment.
The factory will supply chipsets to customers in China, which Intel expects to be the largest information technology market by the time the facility opens in 2010, Intel CEO Paul Otellini said at a news conference in the Great Hall of the People. Chipsets are computer chips that connect a microprocessor to other system components.
The facility in the northeastern city of Dalian will be Intel's first factory in Asia that will fabricate wafers, the thin silicon platters on which dozens of chips are etched, reflecting China's growing importance as a market for high-tech goods. It will boost the Santa Clara, Calif.-based company's investments in China to $4 billion.
The factory will use the most advanced circuit etching technology that the U.S. government will permit Intel to export to China at the time production begins, Otellini said.
The Chinese government said earlier that Intel will be using 90-nanometer technology which refers to making circuits 90 billionths of a meter in width. That is considered to be one to two generations behind Intel's most advanced technology.
Otellini said the company received government incentives to locate the factory in China but declined to give details.
Intel has 6,000 employees in China and factories in Shanghai and the western city of Chengdu making memory chips, microprocessors and other products, according to the company's Web site.
The Chinese government has been trying to attract such high-tech projects in hopes they will help China evolve from a low-cost manufacturing center to a creator of profitable advanced technologies, the AP reports.
China became the world's biggest chip market in 2005, after passing the Americas region. Sales of chips to the country will rise to $111 billion in 2011, from $39 billion in 2005, according to Scottsdale, Arizona-based IC Insights Inc.
China 's PC market, the world's second largest, may rise more than 24-times faster than the U.S. over the five years ending 2011, according to researcher IDC. Sales of computers in China may increase 53 percent to $24.3 billion in 2011 from $15.9 billion last year, compared with a 2.2 percent increase in the U.S., according to the researcher.
The investment by Intel may also help the company recover market share against Advanced Micro Devices Inc., the world's second-largest maker of microprocessors.
Sales of Sunnyvale, California-based Advanced Micro surged 92 percent last year, according to market researcher ISuppli Corp. Intel was the only company among the world's 10 largest chipmakers to post a sales decline, according to ISuppli, Bloomberg reports.
Intel has U.S. government approval to export 90-nanometer technology through 2009. But since the plant won't begin production until 2010, it could go to 65 nanometer if additional licenses were granted, the company said.
The 300mm-wafers lower production cost per chip while consuming 40 percent less energy and water per chip than a 200mm wafer factory.
Intel is in the midst of a major overhaul, including price and job cuts and new product roll-outs, as it works to stave off recent advances by rival Advanced Micro Devices Inc., which has gained market share in the last few years.
Until now, most foreign chip makers have used China for lower-technology test and assembly work, with few doing more sophisticated production, Reuters reports.
Prepared by Alexander Timoshik
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