The risk factor underpins this going-to-places-you-know mentality, according to industry experts.
   "We spend $3.5 billion each time a fab gets built," says Pat Otte, site director of Micron/Intel's new joint venture plant in Manassas, Virginia. "If you are willing to put this amount at risk, then, by all means, go to an unfamiliar, emerging market, low-cost country."
   Location decisions for new semiconductor capacity aren't driven by the same economic calculus that affects other NAICS codes. Land costs are the least of the issues for an industry in which space age equipment comes with stratospheric price tags and a relatively short life before obsolescence.
   Semiconductor facilities don't prioritize low-cost labor either. Futuristic plants and precision technology require a well-educated work force, as well as the peripheral amenities – housing, good schools, access to cultural attractions, restaurants and retail – that upscale workers demand. The products themselves, often the first of a new generation, and often developed first for military uses, rely on deeply-guarded intellectual property.
   Producers are growing where they know these critical elements can be found.
   "The cutting-edge semiconductor product, like the 300-mm. wafer, tends to stay close to home," says Jelinek. "China can't keep pace with the leading edge technology. Jelinek says that firms went to China looking for low-cost, low-skill labor, not for high-end technological innovation. Once innovation becomes commodity, a China location – or another low-cost labor center like Eastern Europe – could work well. But for the highly-educated, highly-skilled brain trust behind the innovation, China doesn't cut it – at least not yet.
   There are slight winds of change, though. Hynix and STMicroelectronics formed a joint venture in late 2004, spending $2 billion to build a state-of-the art, 12-inch wafer fab in Wuxi City, China. Nevertheless, this represents the only investment in a high-end fab in China to date, according to Jelinek – and it's not far from Hynix's Korean home turf.
   There is ongoing concern about intellectual property protection in China as well. This, too, is keeping some high-end manufacturers away. "In the high-end chip space, our members are troubled about the lack of IP security in China," notes Rupert Hammond-Chambers, president of the US-Taiwan Business Council, an industry group representing Taiwan manufacturers.