U.S. computer chip giant Intel Corp. said on Monday it will build a 2.5-billion-U.S.-dollar semiconductor plant in Dalian, a port city in northeast China's Liaoning Province.

The plant, to be located in a high-tech zone north of Dalian's city proper and known as Intel's first factory in Asia, will become part of Intel's network of eight factories worldwide that produce 300-millimetre integrated wafers after it becomes operational in the first half of 2010.

Construction of the plant will start before the end of this year, Intel said in a press release.

The new project will make Intel "one of the largest foreign investors in China" and raise its total investment in the country to nearly four billion U.S. dollars, said Paul Otellini, Intel's president and chief executive officer, at Monday's press conference at the Great Hall of the People in central Beijing.

Naming the project Fab 68, Otellini says the the numbers six and eight are "auspicious" which he hopes will bring further prosperity.

"Our goal in China is to support a transition from 'manufactured in China' to 'innovated in China'," he said.

The new plant, covering more than 160,000 square meters, will use 90-nanometer technology, an advanced method of computer chip making that measures its work 90 billionths of a meter, which the CEO recognized as the "most advanced technology that the US government has licensed for export".

Otellini says Intel chose Dalian over a dozen other sites, including cities in Israel and India, because China is Intel's fastest growing market and the cost of production is lower.

Infrastructure, education, adequate power, water and logistics in Dalian were all factors in securing the deal, said Otellini.

It took Intel and the Dalian government three years of negotiations before the deal was sealed.

Intel required Dalian to answer more than 1,000 questions and the city required the company to meet high environmental standards, said Dai Yulin, Vice Mayor of Dalian.

Dai said a range of support facilities are to be built for the project. Construction of the export processing zone has already been completed.

As one of the largest China-U.S. cooperation projects in recent years, the new plant will reinforce Intel's leading role in the global semiconductor manufacturing industry while bolstering the growth of China's integrated circuit industry, said Zhang Xiaoqiang, vice director of the State Development and Reform Commission.

Zhang views the project as a proof that China and the United States can cooperate in high technology. "The economies of the two countries are complementary and we could extend our cooperation for mutual benefit."

Stressing that China is stepping up efforts to protect intellectual property rights, Zhang expressed his hope for more foreign cooperation.

Hailing the project a milestone in Sino-U.S. cooperation, Tang Zhongde, of the Dalian Bureau of Information Industry, said the technology was mainstream in 2006. Although China will still be two generations behind the most advanced technology when the plant is completed, it was still a "big leap" for China's information industry.

China has several chip plants using 130 or 100-nanometer technology, including one built by Intel rival Advanced Micro Devices (AMD).

The Dalian plant will help promote economic growth in China's northeast, a former heavy industry base that has suffered a decline following China's state sector reforms over the past decades, said Xia Deren, mayor of Dalian.

The city government estimates the new plant could provide about 1,700 jobs and the plant and the economic spin offs it creates in training, logistics and other services, will be worth 120 billion yuan (15.4 billion U.S. dollars).

Intel will also fund for a semiconductor college in the Dalian University of Technology and donate an eight-inch chip producing assembly line. The college will be open to students in this August.

Source: Xinhua