Sun, Sep 09, 2007 - Page 11 News List

Intel starts work on premier chip factory in China

MARKET MOVEThe US$2.5 billion fab will be used to make chipsets, with US restrictions on high-tech exports limiting production to either a 65nm or a 90nm process

AP , DALIAN, CHINA

Intel Corp yesterday held a groundbreaking ceremony for its first chip factory in China, expanding its presence in the booming Chinese computer industry and boosting Beijing's campaign to lure foreign high-tech investment.

The US$2.5 billion facility, one of the biggest single foreign investments in China, will be Intel's first silicon-wafer fabrication plant in Asia and its eighth worldwide. It is set to open in 2010 with a work force of 1,200.

The new factory, dubbed "Fab 68," will produce chipsets, which connect microprocessors to other computer components. Intel says it chose not to equip the plant with its most advanced processes because of US restrictions on high-tech exports.

The groundbreaking ceremony was attended by Intel chairman Craig Barrett, a deputy chairman of the Chinese Cabinet's main planning agency and the mayor of this northeastern port city, which is a growing center for the software and computer industries.

"China is obviously such a booming economy. We very much felt like it was important to be near our customers," said Kirby Jefferson, the Dalian plant's general manager, in an interview ahead of the ceremony.

Santa Clara, California-based Intel says China already is its second-largest market after the US and is expected to be the world's biggest information technology market by 2010.

Foreign investment in China's computer and other high-tech industries is growing as companies set up factories and research centers. But the communist government wants more and offers tax breaks and other incentives to lure investors.

Chinese Premier Wen Jiabao (溫家寶) appealed this week to foreign companies to do more research in China. He promised to protect intellectual property, a key concern for many companies, which are reluctant to transfer advanced know-how to China for fear it will be stolen amid rampant product piracy.

"What we hope is that growth enterprises and emerging companies will base more of their research and development centers in China," Wen said on Thursday in Dalian at the World Economic Forum, a gathering of Chinese and foreign business leaders.

The Intel investment also gives a boost to government efforts to develop China's northeast, a former heartland for state industry that has suffered a steep decline.

Intel picked China because of its market and growing pool of skilled workers, rather than for the low labor costs that attract other manufacturers, Jefferson said. He said because of the huge investment in equipment for chip production, labor was only a small fraction of total costs.

"It's really that we're coming here simply because of the market," Jefferson said.

Intel also has "wafer fabs" in the US, Ireland and Israel. It has assembly and test facilities in Costa Rica, Malaysia and the Philippines. In China, the company has factories in Shanghai and Chengdu making memory chips, microprocessors and other products, and research centers in Beijing and Shanghai.

The company is still deciding which level of technology to use in Dalian, Jefferson said. He said it would be either a 65nm or a 90nm process. That is considered to be one to two generations behind Intel's most advanced processes, which can make circuits 45nm wide.

Intel says it chose not to apply for a US license to transfer its most advanced process to China because of restrictions on high-tech exports to countries where Washington has security concerns.

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