Competition: Intel in Ireland beat off competition from the company's Israeli and US plants for the new €1.6 billion investment announced yesterday.

The world's biggest chip manufacturer, Intel, is to build a brand new fabrication plant at its Leixlip, Co Kildare site. It is the second major investment announced by the company in the Republic in just five years.

The investment is expected to increase the number of jobs at its Irish operations by up to 400 staff, boosting overall employment to more than 5,000 people.

Most of the new positions will be filled by highly skilled semiconductor design engineers, the vast majority of whom will hold a third level qualification and command a salary above €30,000.

Next month Intel will formally announce the opening of Fab 24, a separate €2 billion fabrication plant that will bring a new manufacturing process to Europe.

Mr Jim O'Hara, general manager of Intel Ireland, said Intel chose Ireland for its new investment because of a number of factors, the most important of which was its track record in Ireland.

Following construction of the new Fab 24.2 in 2006, Intel will have invested €6 billion since it set up its first operation in the Republic in 1989. It also contributes millions more by attracting ancillary businesses to the area.

Mr O'Hara also highlighted that Leixlip offered Intel a stable location for its operations compared to other cheaper locations in Asia. But increasing costs are a factor in Ireland, particularly for Intel's oldest fabrication plants in Leixlip, Fab 10 and Fab 14, he said.

The Tánaiste, Ms Harney, yesterday described the decision by Intel to invest €1.6 billion as a major coup for Intel Ireland management and staff, for IDA Ireland and for the Irish economy.

"This investment will ensure that Intel Ireland continues to produce the latest microchips using the latest technologies."

The new plant, which has been named Fab 24.2, will use the very latest manufacturing technology, which is capable of reducing the size of microprocessors by about 40 per cent to just 65 nanometres.

This will enable Intel's electronic engineers to squeeze up to 3 billion transistors onto a single 10 cent euro coin. The new microprocessor chips, which will be produced in Fab24.2, will be smaller, faster, use less power and have more functionality than those currently in production.

Intel will build the new 60,000 square feet Fab 24.2 facility adjacent to its other new fabrication plant, Fab 24. Construction of the plant will begin immediately.

The announcement comes as the market for semiconductors recovers following a steep downturn over the past three years. It expects sales of computer chips to rise by 20 per cent this year.

Intel Shareholders last night approved a proposal urging the firm's board to treat staff stock options as a business expense. The vote at the firm's a.g.m. went against the Intel board, which believes expensing options would be bad for the firm and for the high-tech industry as a whole.