Intel Corp said it may invest up to $5.5 billion in manufacturing semiconductors in China, stepping up efforts to improve ties with Beijing as it seeks new revenue streams while demand for its core computer processing chips falters.
The U.S. firm said it would convert a facility in Dalian, Northeast China's Liaoning Province, its first plant in China, for memory chip production. It didn't disclose a time period for the investment, but said it will start making advanced memory chips that can store data without using up power, called 3D NAND chips, in 2016.
The move follows a flurry of deals in the global semiconductor industry, highlighting growing importance of the memory chips used to store data in increasingly popular mobile devices. Researcher TrendForce predicts China will consume $6.67 billion worth of NAND chips this year.
Building a chip industry of its own has been deemed of strategic importance by China in its drive to modernize its economy. Intel's new investment follows a 2014 deal to buy 20 percent stake of two mobile chip producers owned by State-backed Tsinghua Holdings Co.
For its part Tsinghua recently announced a plan to buy a 15 percent stake in U.S. data storage company Western Digital Corp for $3.8 billion.
In separate deals, Western Digital is also in advanced talks to acquire US memory chip maker SanDisk Corp, while Tsinghua is also trying to acquire Micron, though this deal is facing regulatory scrutiny.
Intel's latest move raises concerns that new memory supply from the chip maker could undercut margins for leading industry players.
