The move will affect about 2,000 employees, who will be offered jobs in the western city of Chengdu or other Chinese locations where Intel operates, the US-based company said in a statement.

The consolidation, which will take place over the next 12 months, came "as a result of current economic conditions", the statement said.

"The economic downturn has had an enormous impact on the semiconductor sector, forcing companies to take measures to cut costs," said Liu Liang, an analyst with Industrial Securities, according to state-run Xinhua news agency.

"Moving operations from Shanghai, a high-cost city, to a cheaper place like Sichuan might be an effective way to cope with the financial crisis," he said.

Intel plans to keep a research and development centre in Shanghai, which will also remain the China headquarters for the company.

It said it was still going ahead with the construction of a plant in the northeast Chinese city of Dalian. The cost of this plant was previously given as 2.5 billion dollars.

Intel last month announced plans to close facilities in Malaysia, the Philippines and the United States. Those moves were expected to affect between 5,000 and 6,000 employees worldwide, the company said.

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