With large investments from two global leaders in the semiconductor industry, northwest China's Xi'an city has vowed to build the most complete industrial chain in the country.

The US top semiconductor equipment maker Applied Materials is expected to announce the establishment of a global research and development centre and a software centre in Xi'an, capital of northwest China's Shaanxi Province.

According to Jing Junhai, director of the Xi'an High-tech Industries Development Zone, Applied Materials will announce the building of an eight-inch semiconductor equipment manufacturing base in the city, during a visit by top company executives to the city in November.

The first phase investment will amount to US$150 million and the total investment may even reach US$300 million to US$500 million.

The global semiconductor equipment giant got approval from the Chinese Government in June to set up a China holding company, meaning it can expand its business from purely sales and services to other areas. Applied Materials hinted that it might produce some low-end equipment in China. This kind of equipment accounts for a significant portion, about 10 percent, of its global business.

Another US semiconductor big name Micron Technology also signed an agreement in September to build a test and assembly plant in Xi'an.

Construction will start at the end of this year, and involves a US$250 million investment.

Micron, which has previously complained about challenges from Chinese competitors like Semiconductor Manufacturing International Corp in Shanghai, has also changed its strategy in the Chinese market. It has chosen to assemble some production facilities close to Chinese customers.

The plant is due to begin operations at the end of next year.

A local firm called Xiyue Electronics, founded by a group of Chinese firms, has also invested almost US$100 million into building a six-inch semiconductor manufacturing plant in the city

"Our strength is that we have the most complete industrial chain in China, compared to other semiconductor bases," said Jing at a business process outsourcing international forum yesterday.

(China Daily October 27, 2005)