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Intel announced earlier today in China it will invest $2.5 billion to build a 300mm wafer fabrication plant in the northeastern coastal city of Dalian -- its first new fab plant construction in 15 years, with profound implications for its future business activity in China. An Intel spokesman commented, "This is the fastest-growing major market anywhere. We want to invest to participate in it." Intel-INTC-chart-03-23-07 Construction will start later this year and production is expected to begin in the first-half of 2010. The selection of Dalian is significant because of Chinese politicians' urgency to redevelop the region known as the rust belt. Intel reportedly has spent years negotiating with Chinese officials and says intellectual property protection was a consideration, but it is confident it can protect it. The plant will be dedicated, at least initially, to producing chipsets used to support its core microprocessors. The Wall Street Journal notes Intel could save a considerable amount of money by transferring used production tools to the new site.

Sources: Press release, Bloomberg, The Wall Street Journal
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Stocks/ETFs to watch: Intel (NASDAQ:INTC). Competitors: Advanced Micro Devices (NYSE:AMD). Chipmakers building factories in China: STMicroelectronics NV (NYSE:STM), Taiwan Semiconductor Manuf. (NYSE:TSM), Hynix Semiconductor (S. Korea: 000660). ETFs: Semiconductor HOLDRs (NYSEARCA:SMH), iShares Goldman Sachs Semiconductor (IGW), SPDR Semiconductor (NYSEARCA:XSD)

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Source: Intel Shows Committment to China, Announces $2.5B Chip Factory