Intel boosts China investment despite global slowdown

September 21, 2001 – Shanghai – Intel Corp said it is spending $302 million to expand its chip assembly and testing plant in China, even as the global economy may be teetering on the brink of recession.

The world’s top chipmaker is more than doubling its investment in the plant in Shanghai’s free-trade Waigaoqiao zone, to $500 million from an initial $198 million in 1998. The investment would be used to build a new production line for the validation, testing and assembly of Intel 845 chipsets for Pentium 4 processors, Intel said in a statement seen by Reuters on Friday.

A company official said production of the chipsets began in September and they would be exported. The Shanghai plant also assembles and tests flash memory chips. Intel’s announcement was made amid fresh fears of a possible global recession following devastating attacks on the United States last week. For technology firms, the attacks could slow consumer spending and disrupted airline services would hit shipments for chipmakers, analysts said.

Market research firm IC Insights now expects shipments to drop 34 percent this year, down from an earlier estimate of 27 percent.

But Intel China spokesman Charles Shen said the firm would continue with its “invest for the future” strategy. He said Intel had poured $11.5 billion into research, development and manufacturing worldwide so far this year.

“Intel strongly believes that economics will slow down but technology doesn’t. Smart companies continue to invest during times of economic uncertainty because it gives them advantages when the economy comes into full steam,” Shen said.

“The new investment will build on the progress we’ve made in the last couple of years with the existing assemble and test facility,” he added.

Even as global semi-conductor demand wavers, analysts have said China’s market could grow up to 20 percent annually from an estimated $10 billion last year. Most chips produced domestically are low end by international standards, although this could change after a flurry of massive investments by overseas semi-conductor firms, in particular from Taiwan, in the last year.

“We will continue to bring our leading edge technical and manufacturing expertise to China to help the country develop a leadership role in high-end, value-added manufacturing technologies,” Intel China President Wee Theng Tan said in the statement.

Since August 2000, Intel has quadrupled the size of the chip facility and enhanced its flash chip production capabilities with total floor space increasing to 56,000 square meters from 12,000, the company said.

Shen declined to give output figures.


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