United States government restrictions on high-technology exports may torpedo Shanghai's hopes of attracting Intel's first plant that would make central processing units (CPUs) in Asia, an official newspaper reported. The 21st Century Business Herald said Shanghai was competing with Malaysia and South Korea for the plant, which would make Intel's top-of-the-line products. Intel has 12 such factories in the world. Ten are in the US, one in Israel and one in Ireland. It plans to build a 13th factory in Asia and initially considered China, South Korea, Japan, Singapore, Malaysia, Australia and the Philippines before narrowing the choice to the final three. Intel officials in Beijing were unavailable for comment yesterday because of the Spring Festival. 'This is a very, very sensitive issue,' an industry source in Hong Kong said. 'Every time there's a Hainan incident these things get put on hold. Clearly a sub-micron facility is incredibly strategic to China.' The biggest obstacles to Shanghai getting the CPU plant are US government curbs on high-technology exports to China, including the equipment and technology used to produce Intel's Pentium 4 (P4) chips. The US Commerce Department's bureau of industry and security ranks countries at four tiers for computer exports. Malaysia and South Korea are considered tier-one countries - the most lenient category. China, on the other hand, is lumped in tier three alongside the likes of Afghanistan, Cambodia and Serbia. It is not clear whether the US government would allow Intel to transfer to China the technology and chip-etching equipment to make P4 chips. Intel has already invested US$500 million in an assembly and testing plant in Shanghai's Waigaoqiao Development Zone - one of four such facilities worldwide. Intel officials have made about a dozen inspection trips to consider the feasibility of also building their Asia plant there. Waigaoqiao, home to many information-technology companies, has even set aside an area of two square kilometres for it. Waigaoqiao officials have argued that China will soon overtake Japan to become the world's second-biggest market for personal computers, and that the proposed factory would benefit from both proximity to Intel's existing plant and China's large and fast-growing computer market. The South Korean government is eagerly courting the project and has established a special committee to negotiate with Intel. It is also offering preferential conditions in terms of land, personnel training and financial incentives.