Beijing, March 26:

Intel Corp announced on Monday it will build a $2.5 billion chip factory in China, giving the US company a bigger presence in the booming Chinese market and boosting Beijing’s efforts to attract high-tech investment.

The factory will supply chipsets to customers in China, which Intel expects to be the largest information technology market by the time the facility opens in 2010, Intel CEO Paul Otellini said.

Chipsets are computer chips that connect a microprocessor to other system components. Reflecting China’s growing importance as a high-tech market, the facility in the northeastern city of Dalian will be Intel’s first factory in Asia to fabricate wafers, the thin silicon platters on which dozens of chips are etched. It will boost the Santa Clara, California-based company’s investments in China to $4 billion.

“This project confirms and further enhances the strategic importance of China in our global strategy and in the IT industry around the world,” Otellini said at a news conference in the Great Hall of the People.

The factory will produce 300-millimeter silicon wafers and use the most advanced circuit-etching technology that the US government will permit Intel to export to China by early 2010, Otellini said. Washington restricts high-tech exports to countries where it has national security concerns.

“Depending on how things go in Washington over the next few years, Intel will be able to respond and put in place the technology inside that 300-millimeter factory that is capable of meeting the needs for the product that we intend to build there,” Otellini said.

The Chinese government said earlier that Intel will use 90-nanometer technology, which refers to making circuits 90 billionths of a meter in width. That is considered to be one to two generations behind Intel’s most advanced technology. Intel uses a more advanced process, based on 65-nanometer and soon 45-nanometer technology, elsewhere to produce its newest microprocessors.

Its Dalian factory will be China’s biggest foreign high-tech investment to date.

The communist government has been trying to attract such projects in hopes they will spur the development of Chinese computer and other technology industries, helping China to evolve beyond its status as a low-cost manufacturing center.

The government hopes the new Intel factory will “bring more value-added research projects” to Dalian, said Zhang Xiaoqiang, vice chairman of China’s top planning agency, the National Development and Reform Commission.

Otellini endorsed Chinese technology development goals and said Intel will expand cooperation with government programs for worker training and software development. “Our goal in China is to support a transition from ‘manufactured in China’ to ‘innovated in China,”’ he said.

The Intel investment also is a boost to government efforts to redevelop China’s northeast, a former heartland for state-owned industry that has suffered a steep economic decline. Otellini said Intel expects the 165,000-square-meter Dalian facility, dubbed Fab 68, to be its most cost-effective wafer fabrication plant.

Asked whether production might be expanded to products such as microprocessors, Otellini said, “the opportunity to do other products in there is really wide open. And so we will watch that as the market (and) the various government regulations evolve.” Otellini said Intel received government incentives to locate the factory in China but declined to give details.

Intel already has 6,000 employees in China and factories in Shanghai and the western city of Chengdu making memory chips, microprocessors and other products, according to the company’s Web site.