Spurred in part by city government incentives, International Business Machines Corp. announced it will invest US$300 million to build a silicon chip assembly factory in Shanghai's Waigaoqiao Free Trade Zone - the company¡¯s largest single investment in China.

The new plant, which brings the trade zone in Pudong District its biggest project in terms of capital and its most sophisticated in terms of technology, is scheduled to begin production in January 2002.

The project will provide employment for around 3,000 workers, the company said.

The plant will assemble chips using two IBM technologies, the latest of which rolled out of company laboratories only weeks ago.

IBM said both tech-nologies are designed to produce complicated circuits carrying dense arrays of transistors, resulting in lower heat during operation, greater reliability and smaller size. The chips will be used in mobile phones, laptop computers and personal digital assistants.

"In the past seven years, we have established all of our six business units in China, while it took 10 to 15 years to do the same in Japan and Germany," said Henry Chow, chairman and chief executive officer of IBM China Group.

He called the project a major milestone for IBM's development in China.

Zhou Hanmin, deputy director of Pudong District, where the trade zone is located, said the reasons for Shanghai's victory over other candidates include the city¡¯s rich stock of talent, well-developed support industries, convenient location and generous incentive policies. There were at least nine other locations considered in four countries, including Singapore, according to press reports.

The facility is likely to be designated as a "key project" for Shanghai next year, according to Zhou.

If it earns that distinction, "It will get every possible tax cut, and it will even be allowed to begin part of its construction before the project receives final approval," said Zhou.

The municipal government also will organize negotiations between IBM and a group of banks to provide loans.

"IBM's decision proves that China's new policy to support the integrated-circuit industry does work," said Wang Jianzhang, a senior official with China's Ministry of Information Industry."It is both the policy and Pudong's good infrastructure that made IBM choose Pudong rather than Singapore."

In June, the State Council - China's Cabinet - issued a policy asking local governments to give software and integrated-circuit companies tax cuts and preferential stock listings.

(Eastday)