VIENNA (Reuters) - Austria's AT&S expects its heavy investment to produce the latest in microchip technology will boost annual sales by a third to more than 1 billion euros ($1.1 billion), its chief executive said on Thursday.

The maker of printed circuit boards (PCBs) is investing half a billion euros on a Chinese plant in an effort to compete with the likes of Samsung and Foxconn in producing ever smaller and smarter chips to address the needs of a digitally connected world.

The so-called inter circuit substrates the factory will produce are designed for use in high-end applications for tablets, medical devices and navigation systems, Chief Executive Andreas Gerstenmayer told Reuters.

The third phase of the site's operational start-up is slated for the autumn and Intel, the world's leading chipmaker, is set to be among the first customers, helping to justify an investment that equates to nearly two thirds of AT&S's revenue last year.

"We see ourselves strategically very well positioned for growth and hope that the new site in China will break even at the end of the next business year," Gerstenmayer said.

"Then, we also plan to exceed the 1 billion euro mark (in revenue)."

Industry experts such as consultant McKinsey forecast significant growth for PCB technologies required for connected vehicles, intelligent factories and digital healthcare.

BCC Research expects the global market for PCBs to reach nearly $74 billion in 2021, compared with about $61 billion last year.

The new AT&S plant is located at the technology hub in Chongqing, where the company hopes to benefit from China's drive to build a local high-value semiconductor industry to challenge global chipmaking rivals.

State-of-the-art microchips can help to offset the effects of slowing growth in the smartphone market, where AT&S has been hit by a drop in orders from Apple, said Hauck & Aufhaeuser analyst Tim Wunderlich.

AT&S chief Gerstenmayer forecast sales growth of up to 12 percent for the current financial year to March 31 but warned that earnings would be squeezed by the ramp-up costs in China. Last year's EBITDA margin of 22 percent could fall to 18 percent, he said.

AT&S shares, which moved up to Austria's ATX index in March, were up 3.7 percent at 10.43 euros by 1221 GMT, outperforming a 2 percent gain for the index as a whole.

($1 = 0.9026 euros)

(Reporting by Kirsti Knolle; Editing by David Goodman)