The deal covers technology transfer by US giant in the start-up's foundry plan Mainland start-up Nanotech Corp will buy used chip-making equipment from United States giant Intel Corp as part of the company's plan to build a US$220 million eight-inch wafer manufacturing facility in Changzhou, Jiangsu province. Under the deal, Intel will also transfer 0.35 and 0.25-micron process technology to Nanotech and help train the mainland company's staff. 'I am pleased that we will obtain equipment and proven technology from Intel,' Nanotech chief executive James Koo said. Financial details of the sale were not disclosed. Intel spokeswoman Colleen Rubart was unsure whether the company had sold used equipment to a mainland company before, saying Intel typically retooled older equipment for internal use. While Nanotech gains access to Intel technology, it can rule out the company as a customer. Intel does not outsource production of its popular computer processors. Vice-president of finance Stephan Chen said Nanotech would begin construction on the plant in the fourth quarter, with production slated to start in the fourth quarter of next year. The Intel equipment will allow Nanotech to produce 15,000 eight-inch wafers per month. Mr Chen said a second phase would double production. Several venture capital firms which have heard investment pitches from Nanotech and another start-up, Green Mountain Integrated, worry the companies are late to the China market. Players such as CSMC Technologies and Advanced Semiconductor Manufacturing Corp have been operating for about six years. The chipmakers tell a similar story: they target mainland demand for low-end semiconductors, which go into everything from rice cookers to refrigerators, and keep costs low by employing used, fully depreciated tools. Last month, Green Mountain broke ground on its eight-inch wafer facility in Nantong, Jiangsu province, scheduled to begin production in the second quarter of next year. The new entrants have raised concerns about overinvestment in the mainland's foundry industry. At one point, there were as many as 25 eight-inch wafer fabrication plants on the drawing board, but companies such as Grace Semiconductor, Shanghai Belling, Shougang NEC and SinoMOS either cancelled or delayed investment plans due to insufficient demand. Merrill Lynch analyst Dan Heyler said 15,000 wafers was not a significant increase in overall mainland production capacity. 'You tend to have investors overreact to the overall number of players,' Mr Heyler said. 'There is a foundry market for legacy products in China which should continue to grow.' Another worry is Nanotech and Green Mountain are scheduled to come online at a time when many analysts expect the cyclical semiconductor industry to begin turning down again. Mr Heyler, however, said there should be sufficient demand for older process technologies used to make low-end chips for consumer devices. 'Keep in mind that the oldest technology in a downturn has the highest utilisation,' he said.