Intel Corp., the world's largest chip maker, plans to spend $7 billion upgrading its U.S. factories over the next two years in spite of tough economic conditions, the company said Tuesday.

Paul Otellini, Intel's chief executive, said the company will upgrade its chip plants, known as fabs, which can cost well over $1 billion each.

Intel will establish a new 32nm manufacturing process. This means that consumers will get smaller, faster and more energy efficient processor, Otellini said in a speech at the Economic Club in Washington, D.C.

The investment will go into new manufacturing facilities in the US, which it already makes 75 per cent of all the countries semiconductor manufacturing.

We're investing in America to keep Intel and our nation at the forefront of innovation, Otellini said in prepared remarks before the press conference.

This is the level of technology where we find the sweet spot for a bunch of new markets we have been aiming ourselves at, Otellini said in an interview with Forbes. You'll start seeing more thin and light products, Apple Air kinds of products.

The investment will be made at existing manufacturing sites in Oregon, Arizona and New Mexico and will support approximately 7,000 high-wage, high-skill jobs at those locations, the company said.

The announcement comes shortly after the company reported that sales of the company's chips plunged23 percent, while its net income fell by 90 percent. The Santa Clara-based company's also began laying off at least 5,000 workers and closing down older chip facilities in Asia and the United States.