Intel Makes Mobile Push With $1.6 Billion Investment in China Site

The chip maker will upgrade the facility over the next 15 years as it continues to try to gain more traction in the mobile processor market.

Intel chip

Intel will invest another $1.6 billion over the next 15 years to upgrade a chip plant in China, the latest move by the company to expand its mobile computing capabilities and to gain further inroads into the important Chinese market.

Intel executives said the company will upgrade its chip fabrication site in Chengdu, China, a 10-year-old facility Intel had previously invested $600 million in.

The chip maker is trying to make inroads into the highly competitive mobile market, which is dominated by ARM and its manufacturing partners, including Qualcomm, Samsung and Texas Instruments. Intel has looked to China in recent years for help in building out its mobile chip capabilities. The investment in the factory that builds and tests chips for smartphones, tablets and wearable devices also is in line with China's embrace of the computer chip space as a growth area for the country.

"Deploying our newest advanced testing technology in China shows our commitment to innovating jointly with China," William Holt, executive vice president and general manager of Intel's Technology and Manufacturing Group, said in the statement. "The fully upgraded Chengdu plant will help the Chinese semiconductor industry and boost regional economic growth."

The work at the site will begin next year, and the company will begin mass-producing chips in the second half of 2016.

Intel, like other established tech vendors, was late in responding to the rapid transition in the industry to mobile computing, and it watched as ARM's low-power system-on-a-chip (SoC) architecture became the dominant force in smartphones and tablets. Since becoming Intel CEO in May 2013, Brian Krzanich has been vocal about the missed opportunity and about driving the chip maker to make up for lost ground.

The company has been aggressive in driving down the power consumption of its Atom and Xeon processors, and has hit some goals, including having 40 million Intel-powered tablets sold this year. However, that came at a cost as those sales were driven in part by subsidies Intel paid device makers to use its chips. In the third quarter, the company's mobile business lost $1 billion on only $1 million in revenue, a significant drop from the $353 million the unit brought in during the same period in 2013. Last month, Intel executives said they were combining the mobile group and the stronger PC business.

Intel officials are looking to China to help the company boost its mobile ambitions. The chip maker last year partnered with Chinese search engine Baidu to create software for China's mobile Internet market and to create a joint innovation lab to help developers leverage Intel-powered devices to create mobile software offerings.

Earlier this year, Intel announced it was creating a $100 million fund and an innovation center in China to fuel the development of smart systems such as smartphones and wearable devices powered by its processors, and soon after said it was partnering with Rockchip—which has made ARM-based chips—to create Intel-based SoCs for tablets. In September, Intel announced it was investing $1.5 billion in Chinese chip maker Tsinghua Unigroup, giving it a 20 percent stake in the state-owned venture that runs Chinese chip designers RDA Microelectronics and Spreadtrum Communications.