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SCMP Reporter

Chipmaker picks Chengdu site for assembly and test plant

China's trump cards in attracting a new US$200 million Intel chip assembly and test plant were its low-cost labour and good educational standards,  according to Intel chief executive Craig Barrett.

While the head of the world's largest semiconductor company would not say whether China offered tax and other benefits, he suggested that they played a role in the location of the plant.

'Most countries other than the [United States] provide incentives for the future,' Mr Barrett said in Beijing yesterday.

The Chengdu plant, in Sichuan province, will have the second-lowest labour costs of Intel's four assembly and test sites in Asia, according to Siew Hai Wong, general manager of assembly and testing in Asia. The lowest-cost site is in the Philippines. Plants in Shanghai and Malaysia have higher labour costs than Chengdu.

'We already have four assembly and test sites around the world and we needed a fifth one,' Mr Barrett said. 'We wanted to situate ourselves in an area with strong education and a local area that wants to have the business.'

While Intel did not discuss incentives provided by countries or cities for plant locations, incentives in most cases 'usually are associated with land, taxes and training', he said.

Speaking of global demand, Mr Barrett said the company was seeing a strong seasonal third quarter but it was tough to figure out whether sales were the result of strong demand by students returning to school or a general recovery in the market.

'We're seeing relatively strong results in every economy in which we have operations,' he said. 'It's not limited to the back-to-school market in the US.'

Intel recently raised its guidance for revenue growth in the third quarter by about 11 per cent.

China is Intel's fastest-growing market, topping the firm's global 11 per cent increase in revenue.

For the past two quarters, the Asia-Pacific, excluding Japan, achieved record growth in revenue. The region's share has grown rapidly from 28 per cent of revenue in the first quarter of 2001 to 41 per cent in the second quarter of last year.

Intel's global revenue in the second quarter was US$6.8 billion.

Mr Barrett believes China will probably remain a more important source of exports for the company than a market for its chips. The Chengdu location was selected for its manufacturing - not sales - potential.

'There's always a degree of emotional factor in being the hometown boy,' he said. 'It gives you a presence in the marketplace. But the bulk of the manufacturing will be for the export market, not local. I doubt it will switch.'

Mr Barrett said strict rules against export of high-technology goods prevented Intel from building a microprocessor plant in China.

The Chengdu plant will test semiconductor wafers sent from Intel's manufacturing plants in Ireland and the US.

Mr Barrett said the US treated incentives for plants as 'corporate' welfare while other countries looked at it as subsidies for acquiring intellectual capital.



Labour cost, education attract Intel