The plant will make 65-nanometre multi-core processors, the sources, who asked not to be identified, told Reuters. This would make it Intel's first such manufacturing facility in Asia.

Intel, which has invested about $1 billion in China to date, already has major test and assembly plants in Shanghai and the interior city of Chengdu.

One source said the investment in the new plant would total a "couple billion" dollars. Both sources declined to give further details of the project, such as the location and timing, although one said the investment could be announced in coming months.

Chip sophistication is measured by how small individual circuits are, with 65-nanometre considered one of the most advanced technologies in mass production today.

An Intel spokesman in Asia had no comment on Friday.

Intel is in the midst of a major overhaul, including price and job cuts and new product roll-outs, as it works to stave off recent advances by rival Advanced Micro Devices Inc., which has gained market share in the last few years.

Intel, which entered the China market in 1985, has over 6,000 employees working on assembly, testing, research and development and sales and marketing in 16 cities there, according to the company's Web site.

Until now, most foreign chipmakers have used China for lower-technology test and assembly work, with few doing more sophisticated production in the market.

Intel said last month it would make China an independent sales and marketing region from the beginning of 2007, underlining the country's growing importance as the company's second-largest consumer market after the United States.

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