Ten years ago there was concern about the impact that China would have on the semiconductor industry; there was a fear that China’s growing chip production would cause overcapacity in the global market. However, by the end of 2013, it was revealed China’s own semiconductor consumption market had grown by 10.1 percent, which was more than double the worldwide market growth of 4.8 percent. The ongoing global demand for smartphones and tablets is the main reason for this continued strong growth in semiconductor consumption and will continue to be a factor in the coming years.
This news is not new to Intel (News - Alert) as the U.S. chip maker is preparing to invest $1.6 billion in China. The goal is to essentially overhaul its chip factory in Chengdu, in western China. The process is expected to run over the course of a 15-year period. This comes about nine years after Intel invested $600 million, which went into operations at the Chengdu facility in 2005.
The investment in China will go toward upgrading the facilities at the chip plant. According to Intel, the company would bring its most advanced chip-testing technology to China. In exchange for that it will receive local and regional government support for construction. The hope is that these improvements will help Intel expand into the mobile device market which includes smartphones and tablets, as well as wearables. We have seen that this is an area that Intel was slow to enter, but is now attempting to gain momentum.
Just a few months ago in September, Intel entered into a partnership to jointly produce Intel-based smartphone chips with Chinese semiconductor maker Spreadtrum Communications (News - Alert). In a statement, Intel executive vice president William Holt said “Deploying our newest advanced testing technology in China shows our commitment to innovating jointly with China. The fully upgraded Chengdu plant will help the Chinese semiconductor industry and boost regional economic growth.”
While it does seem that the major focus is for Intel to establish itself to have its chips used in smartphones and tablets, there is also growing interest in the Internet of Things (IoT). As more devices become connected and communicate with each other, Intel sees the opportunity, so its investment is also geared toward developing chips for the Internet of Things.
If all goes as planned, Intel should be able to begin the upgrades at its Chengdu facility sometime next year. The company's Advanced Test Technology will be used in mass production of chips in the second half of 2016.