Construction of the first phase of Samsung's NAND flash plant in Xi'an, Shaanxi province, involving a total investment of $7 billion, kicked off on Wednesday.

The facility is expected to become fully operational by the end of 2013, when it will have a monthly output of 100,000 chips and annual sales of 66 billion yuan ($10.4 billion).

NAND chips are primarily used in memory cards, USB flash drives, solid-state drives, and similar products, for general storage and transfer of data.

The South Korean company's plant, the biggest ever overseas investment in western China, is located in Xi'an Hi-tech Industrial Development Zone, will produce nanometer chips, mainly used in smartphones and tablet PCs.

Lou Qinjian, executive vice-governor of Shaanxi, said that the project will greatly benefit the province's future development, noting that it will attract more than 160 supporting businesses to the zone, creating more than 10,000 jobs.

"The construction of the Samsung plant will greatly enhance the international influence and competitiveness of Shaanxi's information industry and lay a solid foundation to build a world-leading information industry cluster in the province," he said.

Samsung's Xi'an project is its second semiconductor manufacturing factory established overseas after?a plant was built in 1996 in Austin, Texas.

The company announced in April that it will build the factory in Xi'an Hi-tech Industrial Development Zone, the top State-level zone in western China.

Kim Yong-kwan, senior vice-president of Samsung Electronics, said that the first phase of the factory included some chip production lines and supporting facilities with a total floor area of 448,000 square meters, which will be expanded to 1.1 million square meters in the future.

Mass production is due to start at the plant in 2014, said Kim, adding that Xi'an offered Samsung great advantages in terms of costs. "Power and water supplies, as well as waste water treatment in Xi'an are some 20 to 30 percent cheaper than other cities and its labor costs are around 40 percent cheaper. Such cost advantages are very important," Kim said.

He also pointed out the talent resources in Xi'an, which has more than 80 universities and colleges and around 100 research institutes, which turn out more than 17,000 IT graduates annually.

On Tuesday, Xi'an's Northwestern Polytechnical University and Samsung Electronics signed a memorandum of understanding for the two sides to work together to train senior personnel for the semiconductor industry.

With the agreement, Samsung will set up the China Samsung scholarship at the university and provide scholarships and internships for outstanding graduates.

The two sides will also carry out more research cooperation projects, such as technological exchange programs with South Korean universities and research and development in the semiconductor industry.

Huang Guowei, a local IT student, said that he would graduate next year and thought the project would provide job opportunities for him and his classmates.

To ensure its success, the Xi'an government provided an area of 9.2 square kilometers for the Samsung project and the supporting service infrastructures is also under construction, said Xi'an Mayor Dong Jun.

"With the Samsung project, Xi'an will make great strides in the development of its IT industry and the IT industrial scale will reach 300 billion yuan in 2015," Dong said.

Xi'an has more than 2,600 enterprises engaged in the IT industry and a number of world-famous IT enterprises, such as Applied Materials, Qualcomm, GE, Erisson, Micon, Walsin, Simmtech Electronics, NEC, ZTE and Huawei, have already entered the city's high-tech zone.

Zhang Suofeng contributed to the story.

Contact the writers at malie@chinadaily.com.cn and luhongyan@chinadaily.com.cn