Intel's incoming chief executive Paul Otellini has signalled that the Republic is still a leading contender to win a $3 billion (€2.33 billion ) investment this year.

Mr Otellini, the president of Intel who is due to succeed Craig Barrett in May, told a US tax committee that it would cost the firm $1 billion more to build a plant in the US than in Europe.

He identified the low rate of Irish corporation tax as crucial to competitiveness in the semiconductor industry.

He did not even mention the recent decision by the EU to block State grants for new Intel chip-making plants.

In a presentation to President George W Bush's Advisory Panel on Federal Tax Reform, Mr Otellini said earlier decisions by Intel on where to build fabrication plants were guided by factors such as trade barriers and wage factors.

But taxation was now a much more important factor for the firm.

Mr Otellini highlighted the competitiveness of the Republic, which offers a 12.5 per cent corporation tax rate, and Israel, which offers a 20 per cent capital grant and a 10 per cent tax rate.

He said that over the 10-year life of a semiconductor fabrication plant, Intel would save $1 billion by placing it in Asia or Europe rather than in the US.

He said Intel, the world's largest chip maker, would make its decision on its new chip fabrication plant sometime later this year.

Analysts have tipped Israel and the Republic as leading contenders for the new plant, which is likely to use the very latest chip-making technology.

Intel's existing US plants in Arizona and Oregon will also compete for the new multi-billion dollar investment project.

Currently 12 of Intel's 16 chip fabrication plants are in the US, while 75 per cent of its sales are outside the country.

Analysts have been predicting that Intel will build more plants outside the US to get corporate tax advantages.