Intel CEO denies plan to build China fab

Intel Corp CEO Craig Barrett has reiterated his company's position regarding investing in the People's Republic of China. "We have no immediate plans for a fabrication plant in China at this point," he said. Barrett made his remarks to the South China Morning Post during a flying visit to Taipei, Taiwan last week, having met with Chinese Vice-President Hu Jintao in the US earlier in the week.

Barrett's meeting with Hu had led to widespread speculation that the world's biggest chip maker was preparing to soften its stance and join the growing line of overseas chip makers setting up fabs in China. Intel already operates a fab in China, but Barrett has now quashed speculation that Intel is ready to take more advanced technology there.

Despite China's entry to the World Trade Organization (WTO) earlier this year, high-tech transfer to the country is still a politically charged issue, and subject to close scrutiny by Washington. However, the vast potential of the Chinese market has proved irresistible to many foreign companies, which see a local presence as a pre-requisite for doing business there.

Taiwan's chip makers, for instance, recently won their battle to force the Taiwan government to lift restrictions on mainland investment, arguing that by not playing directly in China, they risked being overtaken by Chinese companies. Taiwan Semiconductor Manufacturing Company (TSMC), Taiwan's biggest chip maker, recently became one of the last to confirm plans to build foundries in China, although it will not be installing leading-edge fab technology, and it insists that its PRC operations will produce strictly for the Chinese market.

With Motorola Corp and IBM Corp also building fabs in China, Intel is one of the last, and easily the most significant company to not build a major plant in China. For the time being at least, it seems Intel's only significant overseas ventures will remain those already in place in Ireland and Israel.

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Taiwanese drought

Anxiety is growing among Taiwanese electronics companies that the island's protracted drought could impact their ability to meet orders. Concerns have been growing since February, and weather forecasters see no likelihood of any rain before the middle of this month, raising fears that the government may have to introduce water rationing.

Taiwan's core semiconductor, TFT-LCD and PCB industries are most at risk, with the Taiwan National Science Council estimating that a 20% shortfall in water supply could force electronics companies to halve their manufacturing capacity. Such companies would probably be given preferential treatment under any government rationing scheme, but key figures such as Taiwan Semiconductor Manufacturing Company (TSMC) chief Morris Chang, are worried that overseas customers may place forward orders elsewhere as a precaution.

Last week Intel Corp CEO Craig Barrett said his company had no plans to alter its procurement policy, and noted that it would be difficult to find alternate suppliers. However, the threat remains a real one.

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