An official at the Dalian Economic Technological Development Zone confirmed that it is in talks with Intel, but nothing has been finalized. "It's not only for packaging," the official said, declining to offer more details until a contract is signed.

A report by Reuters suggested Intel would invest "billions" in a fab that would make dual-core processors on a 65-nanometer process. Rumors that Intel will build a chip plant in China have cropped up perennially for at least five years. Each time nothing has happened, or the "advanced" chip making facility turned out to be a chip packaging plant. Intel runs such plants in Shanghai and Chengdu.

Long-time rumors have also held that Intel will build a plant in India.

China is Intel's second largest market behind the US, so there is good reason for the company to consider putting a plant here. Yet there is also good reason to be skeptical about such a project.

The US government exercises tight control over the export of advanced high-tech manufacturing techniques, and that should restrict Intel from using anything under 0.18 micron in China — not suitable for its CPUs. Even its NOR flash is made on more advanced processes.

One possibility for Dalian is a packaging plant coupled with an R&D facility.