intelwafer.jpgAs predicted, Intel has officially announced its ambitious plan to build a $2.5bn semiconductor plant in Dalian, northeastern China.

The facility, prosaically named Fab 68, is the first new Intel fab
to be built on a new site in 15 years — its last “green field” fab was
located in Ireland.

The fact that Intel has chosen China for the new fab speaks volumes
for just how fast China is advancing both as a hi-tech market and as a
producer of advanced semiconductor technology.

As we said
last week, the fab represents both a tactical move — to get closer to
Intel's growing number of customers in China — and also a strategic
bet on China's high-tech future.

It is this last aspect that particularly worries some US
policymakers and led to lengthy negotiations. Foreign policy hawks fear
that the technology transfer that China expects from the Dallian deal
might end up helping its military machine build better missiles and
tanks.

However, Fab 68 is likely to remain be a generation or two behind
Intel's most advanced semiconductor technologies and according to
Intel's CEO Paul Otellini, it will initially be used to make chipsets
— the supporting cast in a computer — rather than powerful
microprocessors.

A similar concern held up the China ambitions of Taiwan's TSMC. It
set up on the mainland in 2004 after the Taiwanese government relaxed
technology export restrictions, but the fab, in Shanghai, was only
authorised to use previous-generation 0.25-micron process technology.

That restriction was relaxed this month, when the Taiwanese government agreed to let TSMC use 0.18-micron technology., so enabling more sophisticated chips.

Construction on Fab 68 is scheduled to begin later this year with production projected to begin in the first half of 2010.

The new Dalian plant will bring Intel's total investment in China to
just under $4bn, Otellini said, and stands as one of the largest single
foreign investments ever in China.

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