Intel said today it will spend $9 billion on chip factories and other capital improvements in 2011, far above the $5 billion in spent in 2010.

The company made the disclosure in its fourth quarter earnings report, which set a new record for the world’s biggest chip maker. Intel has never been timid about spending money during downturns. But now that we are in a full-blown recovery, as evidenced by the company’s strong sales of $43.6 billion in 2010.

Intel’s capital spending plans are closely watched because Intel is the biggest spender on chip equipment. If Intel is bullish, other chip makers are also likely to spend more, creating a boom in chip equipment sales for vendors such as Applied Materials. The spending also shows confidence in the future, as each chip factory can take two years to build.

Each huge chip factory costs Intel around $2.5 billion. The picture above shows a new chip factory that Intel built in China. Intel said it would also spend about $7.3 billion on research and development in 2011. That amount includes the research the company has to do in order to develop the manufacturing process for its newest factories.

The spending is all the more staggering when you think that Intel spent $7.68 billion to acquire security software vendor McAfee. Even with that diversification, Intel has the cash to spend on factories. Intel has $16.7 billion in cash and short-term investments.

In 2011, Intel generated $16.7 billion in cash from operations and returned $5 billion in cash dividends to shareholders. Intel is starting to spend money on 22 nanometer factories. Currently, the company makes chips using a 32-nanometer manufacturing process. It expects to grow 32-nanometer production from three huge factories to four in 2011.

Stacy Smith, chief financial officer at Intel, said that the company’s move from a three factory model to a four factory model explains why Intel is spending more money in 2011. Intel is growing its revenues quickly and that also necessitates the added investment in capital spending. Otellini said that demand for the 22-nanometer Intel chips is expected to be outstanding.