Microchip CEO Steve Sanghi said the project would take too long to bring online, risking the possibility of cranking up its lines just as the current semiconductor cycle starts winding down. Instead, the company will expand its Asian manufacturing presence at an established facility in Bangkok, Thailand.

Last year, Microchip had hinted that it would spend $50 million to $70 million on a plant in China, where companies like Intel Corp., Motorola Inc, Philips Semiconductors and Infineon Technolgies have committed more than $2 billion to build up back-end production lines.

But Sanghi said he was unable to find an existing site that was suitable for a quick ramp-up. "We'll have to build it to our specification from green field and that's a year to a year-and-a-half long process to establish the infrastructure. We felt that the plant will come too late to meet the current surge in demand," Sanghi said during a recent visit here.

Other countries that had been contenders for the new facility included Thailand, the Philippines, India and Vietnam. Microchip will expand its Thailand operations enough to handle about three years worth of growth