Well, it’s official. Intel is setting up shop here in Dalian.

The factory will produce chipsets, a key component in personal computers, mobile phones and other products, Intel President and CEO Paul Otellini said at a news conference.

The facility in the northeastern city of Dalian will be Intel’s first wafer fabrication factory in Asia and its first built from scratch since 1992, reflecting China’s growing importance as a market for high-tech goods.

This isn’t really new news here. I’ve yet to meet anyone who didn’t know about Intel coming, though few people had details. I first heard about it in December from a local business consultant. He said at the time that when Intel does come, their suppliers won’t be far behind. As their supply chain tightens up, it could mean a huge boom for this area.

Today’s LA Times offered a similar analysis, as well as some insight into why Intel chose Dalian over other cities:

In picking Dalian, a port city about 290 miles east of Beijing, Intel passed up other Chinese manufacturing hubs such as Shenzhen and Suzhou, as well as more developed Asian countries like Singapore and Malaysia — underscoring China’s predominant economic role in the region.

Chinese and Western analysts said Intel almost certainly received substantial tax and other incentives from Dalian officials to locate there.

China’s central government has been trying to revitalize the country’s northeast region, a one-time industrial stronghold that has trailed the coast in economic development.

There are serious questions ahead, though. The LA Times questioned whether Dalian has enough fresh water for Chip manufacturing.

Supply Chain Digest asks: Is Intel giving too much away?

While Intel already has final chip assembly operations in Asia, it does not have have one of its very high tech wafer fabircation plants there. The possibility of Intel making the move already has some concerned that the dominant chip provider will wind up transferring too much technical know-how to China, enabling the country to eventually produce high-end chips itself much sooner than it could othewise.

There are current limits of chip exports to China and other countries that may have potential military uses, and a move by Intel to build a state-of-art plant in China is sure to trigger both regulatory review as well as a backlash among some in Congress and elsewhere concerned about issues ranging from national security to outsourcing of jobs to national competitiveness issues.

We’re all watching. I’ll post updates if I hear anything new.

This entry was posted on Monday, March 26th, 2007 at 12:58 pm and is filed under News. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.