Intel Builds Wafer Fab in China

Intel(INTC Quote) announced plans to build a chip-fabrication facility in China, ending weeks of speculation that the world's No.1 chipmaker was looking East to construct its next major factory.

The $2.5 billion facility, dubbed Fab 68, is slated for completion in 2010 and will feature equipment capable of processing 300-millimeter silicon wafers, more efficient than the the 200-millimeter wafers used by some chipmakers.

The fab will be located in the Northeast coastal city of Dalian, with construction due to begin later this year.

The announcement marks a significant change in Intel's manufacturing plan. The Santa Clara, Calif., chipmaker has several facilities in China, but they are devoted to chip test and assembly, which require relatively high staff levels and can thus benefit from operating in a low-cost region like China.

A wafer fabrication facility, which uses expensive lithography equipment to etch tiny circuits into silicon, would be Intel's first in Asia and would represent the first time since 1992 that Intel has opted to build a fab from the ground up at an entirely new location rather than adding on to an existing facility.

"China is our fastest-growing market and we believe it's critical that we invest in markets that will provide for future growth to better serve our customers," CEO Paul Otellini said in a statement.