Infineon Technologies AG today said it would build a new front-end production plant in Kulim High Tech Park, Malaysia, at a cost of $1 billion.

The facility is to mainly produce power and logic chips used in automotive and industrial power applications to take advantage of the 10 percent growth expected for the worldwide automotive semiconductor market, also being driven by more demanding reliability, security, weight, emission control and power reduction requirements in vehicles.

According to market research from Strategy Analytics, the automotive semiconductor market drew sales of about $13.3 billion in 2003, growing 14.1 percent from $11.5 billion in 2002.

Groundbreaking is planned for early next year with production ramp-up scheduled for 2006. When at full capacity, the fab is expected to employ approximately 1,700 people.

Infineon said this new plant complements its existing non-memory product production sites in Munich-Perlach, Regensburg, Villach, and Dresden, Germany, as well as Altis Semiconductors, a joint venture with IBM in Essonnes, France.

“This new fab is an important step in continuing our successful business with chips for automotive and industrial power applications. With this move, we are systematically expanding our presence in the future market of Asia,” said Wolfgang Ziebart, president and CEO of Infineon, in a statement. “Our continuous investment in Asia also reduces our market risk concerning fluctuations of the U.S. dollar-to-euro exchange rate.”