San Francisco  - Computer chip-maker Intel announced plans to invest 7 billion dollars over the next two years to expand and transform three US manufacturing plants to produce the world's first 32-nanometer transistors.

The move to build the plants in Arizona, New Mexico and Oregon could see Intel gain a priceless advantage over smaller rivals like Advanced Micro Devices (AMD) which don't have the financial resources to invest in new fabrication facilities.

While Intel's long term roadmap had called for the production of the smallest-ever chips, most analysts had expected the giant company to hold off on the massive investment needed to keep shrinking computer chips given the state of the world economy.

AMD is currently upgrading its plants from 65 nanometer chip production to the smaller 45 nanometer chips.

In a press event in San Francisco, Intel said that its 32 nanometer chips would go into production later this year.

The smaller size will allow more chips to fit on a single central processing unit (CPU), allowing devices to run faster with less power and heat. Intel said the first chips would be aimed at desktop and laptop functions and have dual core and six core processors. This means that two or six CPUs respectively will be combined together in a single unit.

The new chips could dramatically slash device costs, and allow Intel to extend its dominance from computer chips to chips that power cell phones and other electronic devices.

"The chips (that the new factories) produce will become the basic building blocks of the digital world, generating economic returns far beyond our industry," Intel CEO Paul Otellini said. "We're investing in America to keep Intel and our nation at the forefront of innovation."

The announcement came after Intel last month announced plans to cut as many as 6,000 manufacturing jobs and shut down four facilities in California, Oregon, Malaysia, and the Philippines. dpa