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)

The government hopes the new Intel factory will "bring more value-added research projects" to Dalian, said Zhang Xiaoqiang, vice chairman of China's top planning agency, the National Development and Reform Commission.

Otellini endorsed Chinese technology development goals and said Intel will expand cooperation with government programs for worker training and software development.

"Our goal in China is to support a transition from 'manufactured in China' to 'innovated in China,'" he said.

The Intel investment also is a boost to government efforts to redevelop China's northeast, a former heartland for state-owned industry that has suffered a steep economic decline.

Otellini said Intel expects the 1.6-million-square-foot Dalian facility, dubbed Fab 68, to be its most cost-effective wafer fabrication plant.

Asked whether production might be expanded to products such as microprocessors, Otellini said, "the opportunity to do other products in there is really wide open. And so we will watch that as the market (and) the various government regulations evolve."

Otellini said Intel received government incentives to locate the factory in China but declined to give details.

Intel already 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.

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AP Technology Writer Jordan Robertson in San Francisco contributed to this report.