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Intel plant to boost Beijing tech plans
2007-03-26
Intel Corp.'s plan to build a chip factory in China is a victory for China's campaign to attract high-tech investment that it hopes will speed development of its own technology industries. Intel CEO Paul Otellini, announcing the $2.5 billion wafer fabrication plant, pledged support for China's effort to transform itself from a low-cost factory to a creator of technology. "Our goal in China is to support a transition from `manufactured in China' to `innovated in China,'" Otellini said Monday at a ceremony attended by Chinese and U.S. officials in the Great Hall of the People. The factory, which Intel acknowledges will not be equipped with its latest technology, will be the Santa Clara, Calif.-based company's first "chip fab" in Asia and its eighth worldwide. It is due to open in 2010 in the northeastern city of Dalian. Otellini and Chinese officials at the ceremony expressed hope the facility will have a "cluster effect," drawing other high-tech business to Dalian and nurturing Chinese supporting industries. Beijing aggressively lobbies companies to move high-tech operations to China in industries ranging from aerospace to telecommunications, hoping its own companies can learn from them and jump ahead. "It's pretty broad-based. It spans everything from high-speed trains to the aviation sector," said William Hess, a senior analyst in Beijing for the consulting company Global Insight. "Those are areas where foreign companies have been dominant, and China is looking to claw back some of that territory." Otellini said Intel received incentives to locate its new factory, dubbed Fab 68, in China but would give no details. "Let me just say they are very fair," he said. Otellini acknowledged that Intel faces hurdles due to U.S. controls on exports of sensitive technology. He said the Dalian factory will use the most advanced technology that U.S. officials will allow Intel to export. The Chinese government said earlier the plant will make chips whose smallest feature size is 90 nanometers, or 90 billionths of a meter. It will be several generations behind the state of the art by the time the factory opens. Beijing has prodded its own companies to invest more in research, offering grants and tax breaks. Some are making advances in telecom and other areas, but analysts say results have been limited. In aerospace, Beijing has pushed Boeing Co. and Airbus to help nurture its domestic industry by buying aircraft components from Chinese suppliers. This month, the Chinese cabinet announced a plan to manufacture big commercial aircraft. The first designs are expected in 2010. Still, attempts to use foreign-financed projects to spur development have boosted investment in factories and research centers but have done less for China's creativity, Hess said. "My gut feeling is that progress hasn't been as quick or as substantive as they would like," he said. Otellini said Intel put its new plant in China to be closer to the Chinese information technology market, which he said could be the world's biggest by the time chip production begins. But other companies have invested in facilities that some dismiss as efforts to placate Chinese officials. Airbus signed agreements in October to open a final assembly line in the eastern city of Tianjin, though all the components will be imported from Europe. Boeing dismissed the project as symbolic and said it had no plans to follow suit. Business groups say companies are reluctant to use their newest technology in China due to Beijing's failure to stop rampant piracy of patents and other intellectual property. Some critics argue that subsidies to foreign companies hurt China's own infant technology industries. "I don't think the government should give any company privileges because it is not fair to the market," said Gao Xudong, a professor at Tsinghua University's School of Economics in Beijing.
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