Intel Plans $2.5B Chip Factory in China

A man stands near an Intel advertisement in Beijing Monday March 26, 2007. Intel Corp. announced Monday it will build a US$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. (AP Photo/Greg Baker) (Greg Baker - AP)

BEIJING -- 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.

Chipsets are computer chips that connect a microprocessor to other system components.

Reflecting China's growing importance as a high-tech market, the facility in the northeastern city of Dalian will be Intel's first factory in Asia to fabricate wafers, the thin silicon platters on which dozens of chips are etched. It will boost the Santa Clara, Calif.-based company's investments in China to $4 billion.

"This project confirms and further enhances the strategic importance of China in our global strategy and in the IT industry around the world," Otellini said at a news conference in the Great Hall of the People.

The factory will produce 300-millimeter silicon wafers and use the most advanced circuit-etching technology that the U.S. government will permit Intel to export to China by early 2010, Otellini said.

Washington restricts high-tech exports to countries where it has national security concerns.

"Depending on how things go in Washington over the next few years, Intel will be able to respond and put in place the technology inside that 300-millimeter factory that is capable of meeting the needs for the product that we intend to build there," Otellini said.

The Chinese government said earlier that Intel will use 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.

Intel uses a more advanced process, based on 65-nanometer and soon 45-nanometer technology, elsewhere to produce its newest microprocessors.

Its Dalian factory will be China's biggest foreign high-tech investment to date.

The communist government has been trying to attract such projects in hopes they will spur the development of Chinese computer and other technology industries, helping China to evolve beyond its status as a low-cost manufacturing center.