Intel to convert processor plant in China into memory chips factory

The world's biggest chipmaker, Intel Corp., is converting its semiconductor fabrication plant in China into a memory chip factory.

Some $3.5 billion dollars will be spent on the plant, located in the northeastern city of Dalian, over the next three to five years, although the company says the value may rise to $5.5 billion.

"The expansion is part of our global multi-source supply strategy and will allow us to best serve our customers," Intel's senior vice president Rob Crooke said.

The Dalian facility, which became operational about five years ago, is Intel's first plant in China.

Intel says the factory will begin producing advanced memory chips, called 3D NAND, in the second half of 2016. The technology can store data in mobile devices and computers without using up power. It also uses several layers of cells for storing data, thus increasing storage capacity.

Demand for memory chips has been growing, which is why Intel is escalating production of the technology.

In Intel's most recent quarter, memory chips compensated for weaker demand for personal-computer processors, which account for a majority of the company's sales.

In shifting its focus toward memory technology, Intel hopes to revitalize its business, by providing consumers and businesses with memory chips that make laptops, desktops, and servers more responsive, with faster data access.

The California-based company has had a joint venture with Micron Technology in producing memory chips. Micron, which sells storage devices and chips, says it may tap the Dalian plant as another source for storage device components.

Intel's recent investment comes amid a wave of consolidation among semiconductor companies as well as China's efforts to build its own chip industry.

Last year, Intel bought a 20% stake of two mobile chipmakers owned by China's Tsinghua Holdings Co. Ltd.

Tsinghua meanwhile has indicated its intention to buy a 15% stake in US data storage giant Western Digital Corp. for $3.8 billion. This week, Western Digital said it was buying US memory chipmaker SanDisk Corp. for about $19 billion.

State-backed Tsinghua has also expressed interest in buying Micron.

China is a key market for the global semiconductor industry. According to researcher TrendForce, it will account for about 29% of NAND revenue this year.