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, 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.

Code naming the project Fab 68, Otellini says the the number is "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 plant will use the "most advanced technology that the U.S. government has licensed for export," said the CEO.

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

Intel has invested 1.3 billion U.S. dollars over the past two decades in assembly, test and research and development facilities in China.

The company has assembly and test operations in the eastern municipality of Shanghai and Chengdu in the southwest.

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 National Development and Reform Commission.

The new plant will use 90-nanometer technology, an advanced method of computer chip making that measures its work 90 billionths of a meter.

Compared with the 200 mm integrated wafers that are prevalent on the market now, the 300 mm wafers will provide chips with improved performance of semiconductor components and cut costs. The larger-sized wafers also use 40 percent less energy and water during their production, Intel says.

The company has seven other factories producing 12-inch wafers in the United States, Ireland and Israel.

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 will 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).

Source: Xinhua