Intel Corp said it might invest up to US$5.5 billion in manufacturing semiconductors in China, stepping up efforts to improve ties with Beijing as it seeks new revenue streams while demand for its core computer processing chips falters. The United States company said it would convert a facility in Dalian, Liaoning province - its first plant in China - for memory chip production. It did not disclose a time period for the investment, but said it would start making advanced memory chips that could store data without using up power, called 3D nand chips, in the second half of next year. The move follows a flurry of deals in the global semiconductor industry, highlighting growing importance of the memory chips used to store data in increasingly popular mobile devices. Researcher TrendForce predicts China will consume US$6.67 billion worth of nand chips this year, or 29 per cent of global nand industry revenue. Building a chip industry of its own has been deemed of strategic importance by China in its drive to modernise its economy. Intel's new investment follows a deal last year to buy a 20 per cent stake of two mobile chipmakers owned by state-backed Tsinghua Holdings. For its part, Tsinghua recently announced a plan to buy a 15 per cent stake in US data storage company Western Digital Corp for US$3.8 billion. In separate deals, Western Digital is also in advanced talks to acquire US memory chipmaker SanDisk Corp, while Tsinghua is also trying to acquire Micron, although this deal is facing regulatory scrutiny. Intel's latest move raises concerns that new memory supply from the chipmaker could undercut margins for leading industry players such as South Korea's Samsung Electronics and SK Hynix, and Japan's Toshiba Corp. Analysts have said that healthy profits for the industry in recent quarters come partly due to careful capacity management among the dominant players. Shares of Hynix dropped 5.7 per cent yesterday on concerns about the company's outlook. The firm is due to report third-quarter earnings today. "Hynix needs to boost competitiveness for its nand business but these issues are creating problems for the company," Hana Financial Investment analyst Rokho Kim said.