In a bid to foster the nation's micro-electronics industry, Shanghai established China's first integrated circuit (IC) design base Sunday.

The Ministry of Science and Technology and the Shanghai government have promoted the base in the city known for its advanced research and industrial capability.

Shanghai New Huangpu Group, a real estate company, is spending 20 million yuan (US$2.4 million) to refurnish a 200,000-square-metre space for IC design institutes.

"China's IC design ability lags far behind its production capacity," said Hui Yongzheng, vice-minister of science and technology. "But the nation's economic development demands more IC chips."

"We chose Shanghai as the nation's first design base because the city has strong manufacturing abilities and high-tech talents," Hui said.

China needs about 12 billion integrated circuit chips valued at 43.6 billion yuan (US$5.3 billion) annually, but most are now imported. At present, it develops only 300 types of ICs, far behind what it needs.

"We have built IC production lines, but many are processing chips for overseas users," said Zhang Ao, deputy director of the Shanghai Science and Technology Committee.

The city now has the capacity to produce 40 per cent of the nation's total chips.

Shanghai has 17 IC design institutes and it has reserved more than 1 billion yuan (US$120 million) in seed funds for use to promote the high-tech industry.

Wu Minglie, New Huangpu president, said 13 IC design institutes have moved into the base and some investment companies are showing strong interest in IC design.

"They are planning to set up chip design enterprises," Wu said, adding that the group has taken measures to support them.

Zhang said the base will build a lab supporting its chip design enterprises because a single company does not have the financial power to do so.

It will also launch a multi-chip program to serve university students and researchers who are designing IC.

"The city is carrying out its plan to encourage co-operation among designers, manufacturers and users," Zhang said.

Shanghai is developing 100 types of integrated circuits with market potential, and is expected to create an annual output value of 1 billion yuan (US$120 million).