International entertainment company Technicolor will open an Adelaide visual effects studio, promising to create hundreds of jobs over the next few years.

The studio — which will cost $26 million — is due to open by the second half of the year.

Technicolor's credits include The Shape of Water — which has been nominated for 13 Oscars — along with films including The Jungle Book, The Martian and Wonder Woman.

The studio has also worked on Oscar-nominated film, The Shape of Water. ( Supplied: Fox Searchlight )

Chief executive Fred Rose listed favourable tax arrangements in the state and a strong pool of young talent being behind their decision to locate in Adelaide.

Mr Rose said the company hoped to create 500 new positions within five years.

"To be candid, the way these things work is that success basically engenders more success," he said.

"If the first one or two projects coming out of Adelaide are of high enough quality, clients will want to come back.

"The Australian tax credits are quite attractive and we believe that... you're at the point where South Australia is going to be very attractive to our clients."

Mr Rose said an exact location for the studio had not been finalised, but he said the company was "on the hunt" for property.

"We wanted to have the announcement before we looked officially in the real estate market," he said.

"We're very confident that there will be no problem finding the right studio environment."

The studio, which will be called Mill Film, is expected to be more than 3,000 square metres in size.

It will initially concentrate on visual effects for major film studios and screening services and will expand into virtual and augmented reality.

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Premier Jay Weatherill said he was "thrilled" by the company's decision to set up a studio in Adelaide and described the company as "one of the world's greatest".

"This is a very significant investment and represents a massive entry into the Australian visual effects market, and they've chosen Adelaide, out of all the places in Australia, to adopt as their home," Mr Weatherill said.

"This company wants to come here and not only create these jobs and opportunities, but also train young South Australians so they can participate in the sector.

"We've partnered with Technicolor to bring this about."

SA Premier Jay Weatherill carrying popcorn at the announcement for the new Technicolor studio in Adelaide. ( ABC Adelaide )

The overall economic benefit is estimated at almost $253 million over 10 years.

"It's been a discussion that's been ongoing for over two years, and more intensely over the last year," he said.

"I'm very proud to say that it will be these sorts of jobs created in this sector which will create the sort of excitement that will keep young South Australians here."

Adelaide is also home to visual effects firm Rising Sun Pictures, which shared the glory of a 2014 Academy Award for best visual effects in the film Gravity.

The South Australian Film Corporation, established in 1972, has long been a focal point for television and film production in Adelaide, and has worked on productions including Breaker Morant, Storm Boy, Wolf Creek and Anzac Girls.

A sequel for Storm Boy featuring actor Geoffrey Rush was in production last year.