Intel's first Asia fab goes to China, not India

Even as the Indian government has been speaking of "reopening talks" with Intel Corp, the world's largest semiconductor maker has announced its plans to build its first computer-chip factory in China (and its first in Asia), investing $2.5 billion in a country that assembles 50 per cent of the world's personal computers.

Construction begins later this year and the factory will start production of computer chipsets in the first half of 2010, Intel's chief executive officer said today. The plant raises Santa Clara, California-based Intel's investment in China, to almost $4 billion. The factory will bring Intel closer to customers including Lenovo Group, which acquired International Business Machines Corp's PC business in 2005, and Dell in China.

The new factory in Dalian will be Intel's first chip factory in a new location in 15 years. Intel joins STMicroelectronics NV, Taiwan Semiconductor Manufacturing Co and South Korea's Hynix Semiconductor in building factories in China.

China has always been a haven for fab plants. For instance, it gave newly built semiconductor players a 100 per cent tax break for the first five years, and then a 50 per cent discount for the next five years.

India has always been lagging on this front. Intel earlier preferred Italy's "friendly" environment to India. On March 22, Union Minister for IT and Communications Dayanidhi Maran had told the media that he would reopen negotiations with Intel and other companies to explore possibilities of them setting up units in the country. An Intel spokesperson had then said, "Once the comprehensive policy document is circulated, we will evaluate and respond." This time around, the spokesperson said, "Intel India has no announcements to make at this point of time."

Last month, the government had announced a host of incentives in the semiconductor policy. It expects to attract an investment of $6-10 billion by luring two-three fabrication units (one of them is Intel) at an investment of $2-3 billion each by 2010 now that it has notified to the semiconductor policy.

However, there have been two views on this issue "� one that India should restrict itself to chip designing (where it has a clear edge with over 125 players already existing in the country), and leave fabrication to those countries which are already in the business. India will also need a fabrication industry of its own to create a full semiconductor ecosystem.