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Intel has received approval to build a $2.5 billion chip-manufacturing plant in China amid booming Chinese demand for chips used in personal computers and mobile phones, the government said Tuesday.

The factory is planned in Dalian, Northeast China's Liaoning Province, the National Development and Reform Commission, the country's top economic planning agency, said on its website.

Intel, the world's largest semiconductor maker, has not revealed plans to build a chip plant in Dalian. Intel officials in Beijing and the chipmaker's headquarters in Santa Clara, California, declined to comment, saying the company has not made a formal announcement.

Demand for chips in China has soared as the country has risen to become the world's largest population of mobile phone users and as computer sales grow rapidly.

The government wants Chinese companies to spend more on developing profitable technology and is encouraging foreign companies to move high-tech facilities to China.

The Intel factory approved for Dalian would use 90-nanometer technology, the NDRC announcement said.

One key way the chip industry measures manufacturing sophistication is the size of the circuitry, and the process Intel plans to use in the China facility means the chip parts will be shrunken down to 90 nanometers, or 90 billionths of a meter.

That suggests that Intel plans to use the facility to manufacture flash memory chips and chipsets, which act as a PC's central nervous system by sending data from the microprocessor to other parts of the computer.

Intel currently uses the 90-nanometer process at factories in California, New Mexico, Ireland and Israel to make chipsets and flash memory chips based on the NOR architecture.

It also makes flash chips based on the NAND architecture on the 90-nanometer process through a joint venture with memory chipmaker Micron Technology Inc. NAND flash is a type of memory used in digital music players and digital cameras.

Intel and Advanced Micro Devices are spending heavily to upgrade their factories in other parts of the world to handle microprocessors that need more advanced technology than factories producing chipsets and flash memory. The smaller circuitry allows companies to drive down production costs and boost performance by squeezing more transistors onto the same slice of silicon.

Intel currently makes most of its advanced microprocessors on 65-nanometer technology and said production is slated to begin in the second half of this year on the next-generation 45-nanometer technology. The transistors on chips built on the 45-nanometer process are so small that 30 million of them could fit onto the head of a single pin.

Intel has 6,000 employees in China and factories in Shanghai and the western city of Chengdu making memory chips, microprocessors and other products, according to the company's website.

The Intel facility in Dalian would be one of China's biggest single foreign-financed projects if the company invested the full $2.5 billion (euro1.9 billion) cited in the government announcement.

The biggest foreign investment in China to date is a $4.3 billion (euro3.27 billion) petrochemical plant being built by Royal Dutch/Shell Group and two Chinese partners on the country's southeastern coast.

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