Assembly/Testing Factory Underscores Nation's Growing Role in Tech Sector
URL - http://online.wsj.com/article/0,,SB10619266011790000,00.html
.......
"It's pretty clear that China is becoming the preferred site of manufacturing in the electronics industry," said Intel Chief Executive Craig Barrett. "What would have been surprising is if we had announced a plant someplace else besides China."
......
By JASON DEAN Staff Reporter of THE WALL STREET JOURNAL
Intel Corp. plans to invest more than $200 million in a new semiconductor-chip facility in central China, highlighting the country's increasingly central role in the global electronics supply chain and delivering a much-needed boost to Beijing's campaign to channel investments into China's hinterland.
The world's largest chip maker is set to announce Wednesday plans for the new chip assembly and testing facility in the city of Chengdu, the Sichuan province capital. Intel executives said construction of the plant's first phase could start as early as next year, take an estimated 20 months and cost about $200 million. Intel expects to spend as much as $175 million more on the facility for an unspecified period, the executives said.
Intel, whose semiconductor chips power most of the world's personal computers, has invested about $500 million to date in a similar assembly and testing facility in Shanghai, China's financial capital. Executives said Intel needs more capacity to meet growing demand for its products, especially in Asia. Asia now accounts for more than half of Intel's sales, and regional demand is helping drive a better-than-expected pickup in Intel's business this year.
The announcement underscores the growing importance of China's technology sector in the global tech chain. With its fast-growing market and the increasing concentration of manufacturing operations in China, the country is attracting a growing share of investment from the world's electronics companies. China-based factories now churn out the bulk of the motherboards that house chips inside personal computers, as well as an increasing share of finished PCs, cellular phones and other electronic gadgets for the global market.
Market research firm Gartner Inc. estimates that chip sales in China will grow 18% this year to $27.4 billion, for use in products targeted for both domestic consumption and export. Intel and other foreign companies account for more than 90% of those sales, according to Gartner analyst Dorothy Lai.
Some analysts had predicted a few months ago, when much of China had shut down amid an outbreak of severe acute respiratory syndrome, that many companies would rethink their investment plans in China. But confidence in China's economy has bounced back quickly after SARS was contained. Intel executives said they never wavered in their plans to build the new plant in China.
"It's pretty clear that China is becoming the preferred site of manufacturing in the electronics industry," said Intel Chief Executive Craig Barrett. "What would have been surprising is if we had announced a plant someplace else besides China."
What sets the new facility apart is its location, in Chengdu, some 1,050 miles inland from the eastern port city of Shanghai. China's government, worried about a growing wealth gap between its bustling coastal regions in the east and its poorer inland provinces, has made developing the west a priority. But few multinational companies have so far heeded the call with big investments, preferring the more developed and accessible coast.
Mr. Barrett said Intel chose Chengdu partly for its low-cost, well-trained labor, but the government's western push was a key factor. The company didn't disclose any economic incentives it might receive for selecting the location.
He said he expects a growing share of Intel's testing and assembly capacity to shift to China. But the company plans to maintain its presence in other Asian countries, too. Indeed, the company Tuesday opened a $40 million design and development center in Malaysia. The facility, which employs 1,000 people, is at Intel's production facility in northern Penang island. Mr. Barrett said the company expects to spend $100 million a year on research and development at its Malaysia facilities.
__________________________________ Do you Yahoo!? Yahoo! SiteBuilder - Free, easy-to-use web site design software http://sitebuilder.yahoo.com