The Leixlip site was competing with several other Intel sites worldwide for the funding and the new plant will employ 1,000 additional staff in high technology jobs. Jamie Smyth reports

Intel will restart construction of a state-of-the-art fabrication plant in the Republic and invest more than $2 billion (€2.2 billion) in its operations here in a move seen as a sign of recovery in the technology sector.

The new plant, known as Fab 24, will employ 1,000 extra staff in high-technology jobs, bringing Intel's total workforce in the Republic to about 4,200 people.

The Tánaiste, Ms Harney, said Intel's decision was one of the most important foreign investment decisions of the past decade.

"Ireland would not be the beneficiary of this decision if Intel could find a better workforce or more competitive environment elsewhere," she said.

Intel's decision in favour of Leixlip over other sites had to be "re-won" against competition from other Intel sites, said Mr Sean Dorgan, chief executive of IDA Ireland. He said it illustrated that cost competitiveness was still very important even at the leading edge of technology.

Construction work will begin immediately and the first microprocessors should be shipped in the first half of 2004. These chips will be much more powerful than current models available and will enable consumers to use innovative technologies such as voice recognition.

The decision by Intel to go ahead with the $2 billion project follows two successive delays in construction of the facility due to a massive slump in demand for semiconductors.

Last year, Intel made 200 people here redundant in response to a 35 per cent decline in the value of computer chips sales.

Therefore, the decision to go ahead with Fab 24 yesterday was something of a surprise, the more so given that the firm issued downbeat forecasts on future demand for its products in an update just last week

Intel had also recently disclosed that Intel Ireland was by no means certain of winning the Fab 24 project. It was competing with several other Intel sites worldwide. One of these was a plant in New Mexico in the US.

The firm had also confirmed it was in negotiations with the Fab 24 builders in the Republic to reduce building inflation costs for the project. It is understood Intel successfully renegotiated some terms within its contracts to eliminate some of these inflation costs.

Analysts said last night the decision to restart construction was a positive signal for Ireland and the technology sector.

"The fact they see a demand for their new products is significant," said Mr Barry Dixon, technology analyst with Davy Stockbrokers. "It's a very positive step for the IT sector in Ireland."

About 1,500 building staff will be employed in the construction of the facility, the shell of which has already been built at Intel's existing site in Leixlip, Co Kildare.

The new plant will use the latest technology to manufacture chips much more efficiently than current processes in the semiconductor industry. Intel will use 90 nanometre logic technology to manufacture chips on 300mm wafers, rather than the 200mm wafers, used by the industry.

Mr John McGowan, director of Intel's worldwide corporate services group and former general manager of Intel Ireland, said he believed there would be a lot of demand by the time the Irish plant was completed in 2004. Shorter-term predictions were more difficult, he added.

Intel said yesterday its total investment in the Republic would be $5 billion by the end of 2005.

There are currently 3,150 Intel employees with an extra 1,000 sub-contractors working at its site, mostly in support services.

The company also employs about 80 staff at a research and development centre based in Shannon, Co Clare.

The announcement in the Republic yesterday was co-ordinated with an analysts' meeting in the US, where Intel chief executive Mr Craig Barrett, said Intel would introduce about 4,500 products this year, on par with the number rolled out in 2001.

The company plans to push ahead with its strategy of investing more in research and technology, targeting what it sees as the coming convergence of computers and communications devices, such as cell phones, he added.

Mr Bob Baker, who oversees Intel's fabrication plants around the world, said: "Now the market's a little more relaxed, so we think it's a good time to put this capacity in place."