Intel has started construction on a 45 nanometre chip factory in Kiryat Gat, Israel. The $3.5bn plant is scheduled to open in the second half of 2008 and will be the firm's second 45nm facility, the company said at an event for press and analysts at its fab in Hillsboro, Oregon.

Earlier this year Intel started shipping its first 65nm computer chips and the company expects 65nm to become the dominant technology by 2006. The next generation 45nm technology is currently under development at Intel's Hillsboro plant and the fab there is also scheduled to become the first 45nm production site.

Intel received a $525m subsidy from the Israeli government for its Kiryat Gat facility.

The new fab is expected to have about 200,000 square feet of clean room space and create 2,000 jobs. The chip making equipment is expected to be purchased by 2007.

The Israeli factory will be Intel's sixth fab producing chips using 300mm wafers and, after Ireland, will be the second 300mm site outside the US. Earlier this year Intel revealed plans to start construction of a new 300mm site in Arizona and early in 2006 will upgrade its current 200mm Ireland fab to a 300mm facility.