The MoU was signed by chairman of Intellect Inc, June Min and the state principal secretary of information technology and communications department, J C Mohanty in the presence of Chief Minister Y S Rajasekhar Reddy in Hyderabad.
The state-of-the-art facility, to come up on a 50-acre site at Shamshabad near the proposed international airport, would be set up under the aegis of a new company 'India Semiconductor Manufacturing Company' and is expected to be operational in 2006.
The state government would provide necessary infrastructure, including land, water and high quality power, for the fab to be located near the Hardware Park at Shamshabad.
Reddy said the software and hardware industry would be given all government help and that his government was keen to develop the state as a leading global destination for IT industry.
The semi-conductor manufacturing company will establish technology and captive customers by allocating up to 60 per cent of the capacity and the remaining 40 per cent will be offered for shared capacity.
The chip fabrication plant is expected to provide direct employment to over 10,000 people besides promoting ancillary small and medium enterprises and attracting the end product manufacturing companies, the IT secretary Mohanty said.