Intel has warned the Government that if it neglects advanced manufacturing industries in favour of research and development, it will erode the State's industrial base.

The computer chip manufacturer, which employs more than 3,200 people in Leixlip, has also warned that the proposed carbon tax will further erode the State's cost competitiveness.

Mr Jim O'Hara, Intel Ireland's general manager, said the firm's submission to the Government's task force on competitiveness had urged the Government to evolve its new industrial policy without damaging its strong existing advanced manufacturing base.

He said there was a real danger that by focusing purely on attracting R&D investment to the Republic and not supporting manufacturing, the Government could undermine the foundations that support the Irish tech industry.

"The Government needs to understand that the foundation of R&D is often provided by certain strategic advanced manufacturing firms," he said. "If we jettison and disrupt that foundation we could weaken out industrial base."

Intel, which is currently building one of the most advanced semiconductor manufacturing plants in the world in Leixlip, is anxious that the Government continues to provide grant support for manufacturing industries as part of its policy. There has recently been a change of emphasis within IDA Ireland, which is focusing on providing grant support for R&D activities.

In an interview with The Irish Times to coincide with the publication of ICT Ireland's annual statement today, Mr O'Hara, also highlighted that a proposed carbon tax on industry, which is due to come into effect in January 2005, will undermine Irish competitiveness. ICT Ireland is the lobby group which represents the technology sector.

"I've written to the Government on the issue and stated that it doesn't make sense to tax companies that are already demonstrating best-in-class performance in terms of carbon emissions," he said. "The only thing this tax will do is put further pressure on us."

However, Mr O'Hara, who is also chairman of ICT Ireland, said it was not all doom and gloom with regard to the tech industry. He said on a positive note, demand would recover in the sector, as changes in the technology and the external environment brought an end to the current challenging period for the industry.

"The last couple of years have seen a shift in ICT related industries. The dramatic retrenchment seen in the communications industries, combined with the dotcom implosion." But Mr O'Hara said the cyclical nature of the ICT industry should be remembered.

ICT Ireland has set five key challeneges that need to be addressed to secure the future of the industry, which directly employs 92,000 people and generates €30 billion in exports. The key areas that need to be addressed are: educating the workforce; expanding PC penetration and broadband; boosting R&D; promoting eGovernment; and raising the profile of the technology sector.