Intel plans second assembly plant in China

Heeding Chinese government calls for investors to help develop China’s interior, Intel Corp., the world’s largest chip maker, Wednesday announced it had signed a memorandum of understanding to construct a test and assembly facility in the southwestern Chinese city of Chengdu. With an initial investment of US$200 million, the facility will be the second such plant that Intel operates in China.

The announcement came as Intel CEO Craig Barrett paid a visit to Chengdu on Wednesday as part of an Asian tour that also includes stops in Beijing, Taiwan, Malaysia and South Korea.

Construction of the Chengdu plant is slated to begin sometime during the first half of 2004, with production scheduled to begin in late 2005, Intel said in a statement. In addition to the initial investment of US$200 million, Intel has plans to invest an additional US$175 million to expand the plant in the future, it said.

When operational, the plant will initially employ 675 people, it said.

“Initially, it is likely the facility will produce chipsets. However, we’re not absolutely committed to that,” said John McKean, an Intel spokesman.

Located in southwestern Sichuan province, Chengdu is deep inside China’s heartland where the transportation infrastructure, such as international flight connections for air cargo, typically lags behind the infrastructure that is available in the country’s largest cities and coastal regions. However, Intel believes the required infrastructure is in place to support the construction of a plant in Chengdu.

“We haven’t worked (the logistics) out in detail but we’re confident that it can be handled,” McKean said.

Intel is not the first U.S.-based chipmaker to invest in a plant in Sichuan province. On Semiconductor Corp., which manufactures power management devices, has a joint venture, Leshan Phoenix Semiconductor Co., which runs a test and assembly facility and a chip fabrication plant in Leshan, approximately 165km south of Chengdu.

Intel’s Chengdu plant will be its second test and assembly facility in China. The company operates a similar facility in Shanghai, which was built for the test and assembly of flash memory. In 2001, Intel announced plans for a US$300 million expansion of its Shanghai plant, due to be completed next year, for the test and assembly of chipsets.

In addition to the announcement of plans to build a test and assembly plant in Chengdu, Barrett’s ongoing tour of Asia has seen Intel make a series of announcements.

Starting off on Monday in Taipei, Barrett opened a research and development facility that will focus on the development of technologies used in communications devices and product reference designs, the company said.

On Tuesday, Barrett announced in Penang, Malaysia, that Intel will invest US$40 million to construct a design and development centre there. The centre will focus on the development of manufacturing processes and packaging technology for various Intel products, among other projects, the company said in a statement.