Intel will open a $2.5 billion wafer fabrication plant in China, the first major production facility there, according to the New York Times.

Labeled Fab 68, the new plant will join just seven other plants in the world capable of producing Intel 300mm wafers when it opens in 2010. But Fab 68 will produce only chipsets. Microprocessors themselves will not be produced in China. That's a distinction that won US government approval for the plant.

The move is a huge win for China, which is trying to become a high-tech center.

“The Intel plant is very symbolic,” said Li Ke, a senior analyst at the Semiconductor Industry Research Center in Beijing, a government body. “It is inspiring and will help to expand the production scale of the industry.”

Private industry has been relucant to move to China because of weak protection for intellectual property and the federal government is very concerned about China getting a hold of private sector technology that it can use for military operations.
But by the time Intel opens its facility in the northeastern city of Dalian, the company will have opened production lines of at least two generations of more advanced equipment, Intel officials said.

While other companies have assembly facilities in China, Intel stands alone in the size of the investment and the nature of the operation. It's just Intel's third 300mm wafer facility outside the US. The others are in Ireland and Israel.