China approves Intel chip factory
Intel Corp. has received government approval to build a $2.5-billion microchip manufacturing operation in China’s northeastern coastal city of Dalian, a regulatory agency in Beijing said Tues- day.
The long-rumored investment would be a significant boost for China’s high-tech industry and the nation’s bid to become a leading producer of high-value goods.
Long the world’s dominant maker of shoes, toys, furniture and other commodities, Beijing in recent months has attracted major commitments from companies such as drug maker Novartis and Airbus, which plans to assemble airplanes in Tianjin.
That would help China to better balance its economy, addressing a common criticism that it is running massive trade surpluses by shipping an overabundance of low-value goods.
But it could also spark concerns about China’s growth in high technology as multinational companies set up research and other facilities to take advantage of the country’s hearty supply of engineers and scientists who earn a fraction of their counterparts in the U.S.
For Santa Clara, Calif.-based Intel, the world’s largest chip maker, the expected investment marks further solidification of its manufacturing base in Asia, where the market for computers is growing rapidly. Last year the company announced plans to build a chip assembly facility in Vietnam.
Intel already has a chip assembly operation and test facility in Shanghai and the western city of Chengdu.
An Intel spokesman declined to comment.
In reporting approval of the Dalian project, the National Development and Reform Commission, a powerful agency in Beijing, gave few details.
Chinese analysts suggested that Dalian may not have been the best site for Intel, given that the city is lacking in an abundance of water needed for semiconductor production. But these analysts said Intel might have agreed to better position itself with the Chinese government.
Beijing has been trying to push more foreign investment outside the traditional hubs such as Shanghai and Shenzhen, and into less-developed regions in the west and northeast. Dalian is a growing port city that already has significant investments from Japan and South Korea.
“It seems Intel is transferring its investment to the north and improving its arrangement in China,” said Mei Xinyu, an economist at China’s Ministry of Commerce in Beijing.
Said Hong Bo, an independent technology analyst in Beijing: “Intel is competing hard with AMD and its current situation is not so good. So the Chinese market and relation with the government is very important, and this investment is a sign of commitment to the government.”
The factory will produce chips based on a 90 nanometer manufacturing process, which will help China to build up its integrated chip industry.
Bo said there was another reason why Intel might have decided to go with the 90 nanometer technology: It would be more likely to get U.S. government approval than a higher-level chip.
Shares of Intel fell 36 cents , or 1.9%, to close at $19.12 in New York on Tuesday.
Times staff writer Michelle Quinn in San Francisco contributed to this report.
