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February 28, 2006 11:20 am

Intel to spend $300m on chip plant in Vietnam

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Intel, the world’s largest chipmaker, has announced plans to build a $300m chip assembly and testing facility in Vietnam, marking a boost for the Communist-ruled country’s ambitions of emerging as a high-tech powerhouse.

The Intel semi-conductor facility will be the largest investment by a US company in Vietnam as well as the country’s largest technology investment. The company also has an option to build a second facility of equal size in a second phase of the project, though no decision on that will be made until 2008.

“We consider this to be one small step in a long journey of involvement with Vietnam,” Craig Barrett, Intel’s chairman, said during a formal ceremony, where the Vietnamese government handed over a licence permitting Intel to invest up to $605m.

Mr Barrett said Vietnam’s infrastructure, its young, motivated workforce, and its education system, had impressed the chipmaker, which regularly scouts potential locations for building new facilities.

Intel had been considering Vietnam for several years, but was previously deterred by concerns over whether the country’s infrastructure could support a rapid turn round of exports and imports. Hanoi’s Communist rulers also worked hard to woo the company, reportedly offering highly favourable terms and incentives to secure the prestigious investment.

Intel’s new plant, which will initially employ 1,200 people and is expected to begin production in the second half of 2007, will be located in the Saigon High Tech Park, now home to many small software outsourcing companies.

Vietnam-based software exporters – still struggling against the burden of the country’s wartime image as a US enemy – are hoping that Intel’s investment will help their own businesses, by enhancing the image of Vietnam as a reliable supplier of high-tech products.

Vietnam attracted about $5bn in foreign investment last year, an eight-year high, according to Merrill Lynch. However, the bulk of the country’s exports are still in low-end and semi-skilled manufacturing of items such as textiles and shoes.

But with with over 80m people, and an economy that grew 8.4 per cent last year, Vietnam is south-east Asia’s fastest growing personal computer market. Ownership climbed to more than 1.5m this year, up from a mere 288,000 five years ago.

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