"The present facility in Shanghai will be expanded to enable it to assemble and test the Pentium 4 microprocessor, the highest performance and highest volume shipping chip in the world," said Craig Barrett, Intel's chief executive officer.

During Barrett's visit to China, which included stops in Xi'an, Shanghai, Chengdu and Beijing, Shanghai undoubtedly was the highlight with Intel making its most important announcement so far this year in China.

The announcement's significance reaches far beyond the issue of technology as it brings the cooperative relationship between China and the United States to a new height, industry insiders said.

China, the second biggest market for Intel, lags behind in chip products in comparison with its manufacturing capability in electronic products.

Although China has become a major manufacturer of TV sets, mobile phones, telecoms switches and many other electronic products, most of its chips are still imported.

The US Government used to ban its chip vendors from transferring their most advanced technology to China, saying China should be kept years behind in chip technology.

Intel's move forward spells the beginning of the end of this kind of thinking, experts say.

Chips, the heart of all information products, are tiny in size, but they are the core components that drive the operation of complicated equipment.

To catch up with developed countries in the core technology, the Chinese Government has listed the development of chips and software as a top priority.

With Intel's expansion in Shanghai, the domestic chip industry is sure to get a boost.

According to Intel, producing the Pentium 4 in China will save it time and money in transportation and enable it to respond quickly to the local market.

The new assembly and test facilities will be completed by the end of the year, and the first batch of commercial products is expected to roll off production lines early next year, Barrett said.

"With this new expansion, China will not only produce the most advanced chip products for domestic demand, but for export worldwide as well," he said.

Hit hard by last year's global economic downturn, Intel will take advantage of China's rapidly growing market, he said.

Intel also plans to reshape its development direction, adding communications to its primary focus of computing. Intel missed out on last year's flourishing telecoms industry, China's most outstanding performer.

Since telecoms will become more integrated with computing in the future, Barrett said Intel will provide more chips to satisfy the integrated demand.

"As China's capability for high-end, value-added technological manufacturing increases, the country will become more competitive in today's global technology market," he said.

Intel is mulling over more exciting projects in China as well. The US$100 million expansion in Shanghai accounts for only part of its total US$500 million investment in the factory, but Barrett refused to disclose what Intel would do with the rest money.

According to the forecast of the Ministry of Information Industry, China will need 300 billion yuan (US$36 billion) worth of chips in 2005, and demand will grow to 982 billion yuan (US$118 billion) by 2010.

Domestic manufacturing capability is still low and is expected to only be able to satisfy 30 percent of demand in 2010, suggesting investments in chip production will be very profitable in the coming years.

(eastday.com May 24, 2002)