The money will be used to upgrade the facilities at the plant, in order to help Intel expand into the mobile devices markets including smartphones, tablets and wearables, the U.S. chipmaker said on Wednesday.
As part of the upgrades, Intel will for the first time bring its "Advanced Test Technology" to China, as a way to better assess the quality of its chips, and produce better processors across different product areas.
In addition to focusing on the mobile devices market, Intel's investment is also geared toward developing chips for the "Internet of Things", a growing market segment that involves turning everyday objects, such as kitchenware, bicycles, and toothbrushes, into smart connected devices.
Increasingly Chinese manufacturers and vendors are building electronics for consumers across the world, and Intel wants to become their main chip supplier.
But while the U.S. company has dominated the PC and server markets, its processors are more rarely used in smartphones and tablets. Instead, Chinese vendors have been choosing more power-efficient ARM-based chips from rivals Qualcomm and MediaTek to build their mobile devices.
Intel, however, has been trying to reverse the trend. In the Chinese city of Shenzhen, for example, the company has been courting lesser-known hardware vendors to build tablets using Intel processors.
In September, the U.S. company also entered into a partnership to jointly produce Intel-based smartphone chips with Chinese semiconductor maker Spreadtrum Communications. In May, Intel made a similar agreement with Chinese processor vendor Rockchip, but for tablets.
Intel will start carrying out the upgrades at the Chengdu facility next year. The company's Advanced Test Technology will be used in mass production of chips in the second half of 2016.
Already, Intel has invested $600 million in its the Chengdu plant, which went into operation in 2005.