Intel mum on plans for first China chip plant

Intel declined to comment Friday on reports that it had won approval to build a chip-making plant in China

Intel has won approval from the Chinese government to build its first Asian chip-making plant, according to published reports.

Although troubled by a string of sinking quarterly profit reports and buffeted by a corporate reorganization, Intel is still the world's biggest semiconductor manufacturer. Building a multibillion dollar chip fab and employing thousands of workers would make a huge impact on the local Chinese economy.

A spokesman for the Foreign Trade and Economic Cooperation Bureau of Dalian, a city in northeastern China, said on Thursday that the central government had approved Intel's plan, according to Bloomberg.

Intel declined to comment on the report, but said it has a long-standing policy to increase its presence in the country.

"We have not announced plans to build a fab in China," said Intel spokesman Chuck Mulloy. "I can tell you, however, that we have said many times in the past that since more than 75 percent of our sales come from outside the U.S., we have been and will likely continue to invest in international markets. In fact we have indicated in the past that we'd like to build a fab in China."

Intel has been courting the Chinese market on other fronts, too. In December, the company announced it would hold one of its annual Intel Developer Forum (IDF) trade shows in Beijing instead of San Francisco. The move was part of a plan to scale back its IDF shows from 14 to only three in 2007 -- Beijing in April, San Francisco in September and Taipei in October.

It was not clear what kind of semiconductors Intel would build in the Chinese plant. In general the company makes microprocessors, chipsets and flash memory components in its fabs, then sends those silicon wafers to its assembly and test plants to be cut and packaged. Both operations demand major investments to support -- in 2006 Intel planned to spend US$6.2 billion on capital spending and US$6 billion on research and development.

Future fabs will probably focus on building chips with smaller features. The company is relying on several new technologies to rescue its plunging profits in 2007, Chief Executive Officer Paul Otellini told analysts during a conference call about Intel's quarterly financials on Tuesday. In coming quarters, the company will complete its transition from 90-nanometer to 65-nm process geometry for manufacturing chips, take further steps toward 45-nm manufacturing, build more quad-core microprocessors for servers and workstations, and bundle wireless connectivity with advanced graphics and flash memory in its "Santa Rosa" notebook platform.

The company already has some operations in China, including two of its six global assembly and test sites, located in Shanghai and Chengdu, China. The others are in San Jose, Costa Rica; Kulim, Malaysia; Penang, Malaysia; and Cavite, Philippines. Intel is also building a new site in Ho Chi Minh City.

Intel builds its chips at 15 wafer fabs in nine locations around the world, with U.S. operations in Arizona, California, Colorado, Massachusetts, New Mexico and Oregon, and outside the U.S. in Leixlip, Ireland; Jerusalem and Kiryal Gat, Israel.

Intel's main rival in the microprocessor market, Advanced Micro Devices (AMD) builds all of its chips outside the U.S., using two fabs in Dresden, Germany. That is set to change around 2014 when AMD opens a fab in New York.

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Ben Ames

IDG News Service
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