Hon Hai Group, parent of Hon Hai and Foxconn, will invest more than $1 billion to build a production facility in the southwestern Chinese city of Chengdu, sources and the company said.

Hon Hai, the world's No.1 electronics components maker, would sign an agreement in the capital of Sichuan province Chengdu on Friday, Edmund Ding, the company's vice president for corporate finance, told Reuters.

This is all part of our long-term strategic direction, Ding said, but declined to elaborate.

Two people with direct knowledge of the information had earlier said the firm will spend at least $1 billion on the facility.

It'll be at least $1 billion they're spending on this, said one of the sources. There's going to be a signing ceremony on Friday, and that's probably when everyone will find out about it if they want to make it public.

In addition to the factory, the company is planning to develop real estate in Chengdu to house staff, one of the sources said.

The sources declined to be identified because the information had not been made public ahead of the signing ceremony.

Analysts said the company was likely to be looking into expanding into upstream component manufacturing, or to manufacture components used in alternative energy production.

When you look at all the other top technology and electronics groups, they're all expanding into alternative or clean energy, said Pranab Sarmah, head of tech research at Daiwa Securities. At $1 billion, it's probably going to be very different from what they've been doing previously.

If the electronics giant uses the facility for component manufacturing, it would pit the company against its suppliers, including battery maker Simplo and Chicony.

The company's massive investment also points to a possible rebound in technology demand, amid signs from other top technology players including Intel that consumer and corporate spending is returning.

Revenues at Hon Hai have climbed in recent months, as orders from its clients such as Nintendo and Sony begin streaming in again.

Hon Hai is a key supplier to many of the world's top technology brands, which typically do their own design work but outsource the labour-intensive manufacturing process to contract makers such as Hon Hai and Singapore-based Flextronics.

(Editing by Jon Loades-Carter)

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