Intel Corp (INTC)

[Elmer Phud]

Chip giant Intel said on Monday it would invest $2.5 billion to build a microchip plant in northeastern China, with the production of chipsets to begin in 2010.

Groundbreaking is scheduled later this year for the 300 millimeter wafer fab in Dalian, which will be Intel's (INTC) first semiconductor plant in Asia, chief executive Paul Otellini said in a statement.

"China is our fastest growing major market, and we believe its critical that we invest in markets that will provide for future growth to better serve our customers," said Otellini.

The 12-inch wafer plant will have a monthly capacity of 52,000 wafers and will use 90-nanometer technology to produce chip sets, China's National Development and Reform Commission said earlier this month.

Chipsets are the collection of secondary chips and interfaces that surround the main processor and will be used in desktop computers, laptops and other electronic devices.

The investment comes on top of the $1.3 billion Intel has spent on major test and assembly plants on the mainland.

Intel is cutting prices and jobs while rolling out new products to fend off rival Advanced Micro Devices (AMD), which has gained market share in the last few years.

Until now, most foreign chip makers have used China for lower-technology test and assembly work, with few doing more sophisticated production.
Copyright 2007 Reuters Limited. All rights reserved. Republication or redistribution of Reuters content is expressly prohibited without the prior written consent of Reuters.