Intel Enter China With New Fab
Intel announced that they will invest $2.5 billion in China to build a 300mm wafer fabrication plant in the northeastern coastal city of Dalian. This will be their first new fab plant construction in 15 years. Intel has been involved in China for more than 22 years and over that time have invested in excess of $1.3 billion in assembly test facilities and research and development. This new investment will bring their total to just under $4 billion. The plant will be dedicated, at least initially, to producing chipsets used to support its core microprocessors. This takes them one step closer to their commitment for business activities in China. Intel said they understand that China is one of the fastest growing market and they would like to be a major player there with more participation in new business ventures. Intel joins STMicroelectronics NV, Taiwan Semiconductor Manufacturing Co. and South Korea's Hynix Semiconductor Inc. in building factories in China.
The construction of this fabs will start later this year with the production expected to begin somewhere around 2010. This will spurt job growth in this region, ultimately working great for the Chinese economy. For Intel, China represents a sharp change in the manufacturing strategy and a bet that a bigger profile in the fast-growing market is worth the risk.
So why was the city of Dalian selected ?
Intel has been negotiating with Chinese politicians and officials for a while now on this matter. Chinese politicians are showing urgency to redevelop Dalian a northeastern city located on a peninsula by the Yellow Sea. There would definitely be some incentive for Intel considering the fact that they are going to construct the fab in Dalian.
Intel also had to satisfy export-control agencies, whose rules restrict the export of technology with potential military applications.
Stocks: Intel (INTC).
Competitors: Advanced Micro Devices (AMD).
Chipmakers building factories in China: STMicroelectronics NV (STM), Taiwan Semiconductor Manuf. (TSM), Hynix Semiconductor (S. Korea: 000660).
ETFs: Semiconductor HOLDRs (SMH), iShares Goldman Sachs Semiconductor (IGW), SPDR Semiconductor (XSD)
(Source: WallStreet Journal, Bloomberg)
The construction of this fabs will start later this year with the production expected to begin somewhere around 2010. This will spurt job growth in this region, ultimately working great for the Chinese economy. For Intel, China represents a sharp change in the manufacturing strategy and a bet that a bigger profile in the fast-growing market is worth the risk.
So why was the city of Dalian selected ?
Intel has been negotiating with Chinese politicians and officials for a while now on this matter. Chinese politicians are showing urgency to redevelop Dalian a northeastern city located on a peninsula by the Yellow Sea. There would definitely be some incentive for Intel considering the fact that they are going to construct the fab in Dalian.
Intel also had to satisfy export-control agencies, whose rules restrict the export of technology with potential military applications.
Stocks: Intel (INTC).
Competitors: Advanced Micro Devices (AMD).
Chipmakers building factories in China: STMicroelectronics NV (STM), Taiwan Semiconductor Manuf. (TSM), Hynix Semiconductor (S. Korea: 000660).
ETFs: Semiconductor HOLDRs (SMH), iShares Goldman Sachs Semiconductor (IGW), SPDR Semiconductor (XSD)
(Source: WallStreet Journal, Bloomberg)
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