Intel eyes $2.5-billion chip facility in China

Mumbai: Intel, the world's largest manufacturer of microprocessors, or computer chips, is all set to build a $2.5-billion manufacturing facility in China - its fifth facility in that country in a decade.

China's National Development and Reform Commission is reported to have given Intel the go-ahead to build a $2.5 billion chip-manufacturing facility in the northeastern city of Dalian, reports said. The technology behemoth, however, declined to comment on the matter.

While Intel has been talking of plans to beef up manufacturing in Mainland China, the company declined to confirm the construction plans.

Intel has its main manufacturing facilities for microprocessors in the US, Ireland and Israel.

Intel first opened a plant to build flash memory chips in Pudong, on the outskirts of Shanghai in China, in 1997 and added a second in 2001. It opened a third one in Chengdu, in 2004 while a fourth is due for completion this year.

The new facility will focus on manufacturing chipsets as also other systems such as memory chips and input devices like the keyboard and mouse.

Besides being the world's biggest maker of microprocessor chips, Intel also dominates chipset manufacturing, accounting for about half of the $8 billion generated by chipsets in 2006, according market analysts.

For Intel, shifting manufacturing operations to China makes sense as revenue derived from sales to customers in China and Taiwan accounted for more than $12.1 billion, or some 34 per cent of the $35.4 billion total for fiscal 2006.

Intel currently operates some 2.1 million square feet of manufacturing in California, Oregon, Arizona, New Mexico, and Massachusetts. But that has less to do with sales trends.

Also, most computers, especially notebook computers, are manufactured by companies in Taiwan and China for companies including Dell, Gateway, HP, and Apple.

Most of Intel's most valuable manufacturing operations are, however, still in the US. In 2006, the company said more than $11.6 billion of its $17.6 billion of plants, facilities, and equipment was located in the US, while $2.8 billion was located in Ireland. The remainder, some $3.8 billion, is in other countries, including Israel, Malaysia, Vietnam, and China.