Philips Electronics

(PHG) - Get Koninklijke Philips N.V. Sponsored ADR Report

said its

Philips Semiconductor

unit plans to spend up to $1 billion on a new test and assembly plant in China.

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The new plant will be built in eastern China's Suzhou Industrial Park and should help the company meet what it expects to be high demand for semiconductor chips, according to reports.

The facility, which should be completed by 2006, would create around 3,500 local jobs. Up to 500 of those jobs would be engineering posts.

Shares of Philips lost 85 cents, or 3.2%, to $25.40 in recent trading on the

New York Stock Exchange

.