Intel has announced it is to spend $2.5bn (£1.27bn) on a new facility in China. Although it has regularly upgraded other facilities, Fab 68 will be the first factory it has built from the ground up since Ireland's Fab 10 in 1992.

The factory will be dedicated to manufacturing chipsets and will be located in the north-east Chinese city of Dalian.

" Intel has been involved in China for more than 22 years and over that time we've invested in excess of $1.3bn in assembly test facilities and research and development, said Intel chief Paul Otellini. "This new investment will bring our total to just under $4bn, making Intel one of the largest foreign investors in China."

Otellini spoke of the co-operation between Intel and the Chinese government to aid economic development in China, particularly in the north east of the country, which has historically had little to do with high-tech industry.

"The investment in Dalian will have a positive impact on the regional economic development and the development of integrated circuits industry in the old industrial base of north-east China," said Zhang Xiaoqiang, of the National Development and Reform Commission.

"We welcome Intel and other multi-national companies to invest and co-operate with China," said Xiaoqiang.

Fab 68 will become part of Intel's manufacturing network that will constitute eight factories capable of manufacturing 300mm wafers. The others are located in the United States, Ireland and Israel. The Dalian factory is expected to start production in 2010.

Manufacturing with larger 300mm wafers dramatically increases the ability to produce semiconductors at a lower production cost compared with more commonly used 200mm wafers.

300mm manufacturing technology also consumes 40 per cent less energy and water per chip than used in the production of each 200mm wafer.