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India competing for next Intel factory

India's information technology minister said Tuesday he plans to travel to the United States to encourage Intel Corp. to choose India as the site of its next factory.
/ Source: Reuters

India's information technology minister said Tuesday he will travel to the United States this month to encourage Intel Corp. to choose India as the site of its next factory.

Though considered a long-shot, India is one of several Asian countries lobbying to attract the world's largest chip maker to its shores to build a manufacturing plant. Analysts say Intel is preparing to announce this year a round of manufacturing investments worth up to $8 billion.

Those expectations have touched off a race among officials in Asia, Europe and the United States eager for the economic stimulus and prestige that can come from hosting an advanced chip factory.

Intel manufactures chips in the United States, Ireland and Israel, and then ships them to sites in Asia and Costa Rica to be assembled and tested. The company lacks a full-fledged manufacturing plant in Asia, its fastest-growing market, a deficiency that executives have said they would like to address.

India, with its creaky infrastructure and restrictive labor laws, has yet to make its mark as a high-tech manufacturing center. A host of other Asian countries, from China to Singapore to Malaysia, have superior infrastructure that would be needed to support an Intel manufacturing plant.

This has not stopped Indian officials from reaching out. "I'll be going to the U.S. in the last week of this month to convince Intel to set up the next factory in India," Information Technology Minister Dayanidhi Maran told reporters on Tuesday.

Chuck Mulloy, a spokesman for Intel, said the company does not comment on speculation about new manufacturing sites. "We talk to governments all the time about potential sites," he said. "We have made no decisions of that nature."

Expectations building
Some within the chip-making equipment industry expect Intel to announce plans for a new factory before the end of the year, and some say the company has already made a decision on a location, said Risto Puhakka, the president of VLSI Research, a semiconductor industry analysis firm.

A likely package, he said, could include plans for two plants each costing $3 billion, and support facilities and other investments worth another $2 billion, Puhakka said. Singapore, Malaysia, India and China could all be in the running, as could the United States, he said.

"It gives all the economic benefits you could imagine," Puhakka said. "Then comes the prestige. It has a really big multiplier effect"

Intel already has a development center in India's technology capital, Bangalore, which designs and develops software to power chips that drive computers and high-end networks for Internet-based applications.

Over the past year, Maran has been aggressively lobbying firms to set up manufacturing units in India. India's software skills are widely recognized and firms such as Motorola have set up large units to outsource software services.

There are no chip manufacturing units in the country. But the tide may be turning as firms such as Nokia and LG Electronics Inc. invest millions of dollars to set up mobile handset manufacturing plants in India to cater to growing demand in Asia's fourth-largest economy.

Elsewhere, Intel's manufacturing operation has been active this year. The company recently announced plans to expand its assembly and testing operations in China, and has submitted a preliminary development plan to expand its Ocotillo campus in Arizona. The company has also reached a tentative agreement with officials in Oregon for a tax incentive plan for potential future construction.

In March, the government of Ireland was forced to withdraw a $225 million incentive package to Intel after the European Union said the pact could violate rules that prohibit state aid. The move earned a public rebuke from the U.S. chip maker.

"We'll factor this development into future plans for increasing investment in Ireland," a spokesman for the company said at the time.