Intel Invests $300m To Expand China Chip Processing Plant

Intel is to expand its chip packaging and testing operations in Chengdu, China, in a show of support for mainland China, which is a critical part of Intel’s supply chain as well as its biggest market.

The chip maker already operates a substantial chip packaging and testing plant in Chengdu, in southwestern Sichuan province.

The facility, founded in 2003, is responsible for the packaging and testing of more than half of Intel’s laptop processors shipped worldwide.

The expansion involves adding such processing for server chips, Intel China said in a WeChat post.

Key market

The expansion will also include a “customer solutions centre to improve the efficiency of the local supply chain, increase support for Chinese customers and improve response time”, the post said.

Planning and construction of the expansion is already underway, local media reports said.

The company is to transfer $300 million (£231m) to its local Intel Products (Chengdu) entity to support the expansion, the city’s Reform and Development Commission said on WeChat.

The move comes amidst steadily rising tensions between China and the US, which has ramped up export restrictions on cutting-edge products and pressured allies including Japan and the Netherlands to do so as well.

Earlier this month the Cyber Security Association of China (CSAC) called for a review of Intel’s products sold on the mainland, alleging they pose a national security threat due to “frequent vulnerabilities and high failure rates”.

The group said a review should be carried out “to effectively safeguard China’s national security and the legitimate rights and interests of Chinese consumers”.

Intel said at the time it abides by local laws and prioritises product safety and quality.

Political tensions

The CSAC’s allegations followed a Chinese security review into US memory chip maker Micron Technology last year that resulted in a ban on Micron products in key information infrastructure, moves that were seen as retaliation for US restrictions.

In spite of such political tensions, China remains a key part of the supply chain and a major market for US companies including Intel and Apple.

The mainland is Intel’s largest market, contributing 27 percent of its revenues last year, ahead of the US at 26 percent.

Intel chief executive Pat Gelsinger personally visited the Chengdu plant last year to mark its 20th anniversary, saying in an address that the plant plays a critical role in Intel’s global supply chain.

The company, which has been struggling to execute a turnaround plan that involves a shift into contract manufacturing, in August reported a shock loss of $1.6bn in the second quarter, down from a profit of $1.5bn the year before.

It warned of “weaker spending across consumer and enterprise markets, especially in China”, and said at the time it would cut 15,000 jobs.