AMD to invest $2.5 billion at German chip plant

Advanced Micro Devices will spend $2.5 billion to expand its chip manufacturing plants in Dresden, Germany, to keep pace with growing demand for its PC and server chips, the company announced Monday.

Most of the money will be spent on new equipment to upgrade an existing plant, called Fab 30, from 200-millimeter to 300mm wafer production, AMD said. Wafers are the round platters of silicon from which individual microprocessors are cut. The transition to 300mm will allow AMD to produce more than twice as many chips per wafer, reducing production costs.

The Sunnyvale, California, company will also expand production at an existing 300mm plant, called Fab 36, and build a new clean room to handle final testing procedures, it said.

Intel retains a commanding lead in the processor market but AMD has gained share, particularly in the low-end server market, where its 64-bit Opteron processors have been performing well. AMD expects demand for its products to continue to increase, it said.

AMD had already announced investments of $2.4 billion to expand Fab 36. The latest investment, to be made over three years, is in addition to that, bringing the total close to $5 billion. Some of the money is provided in grants from the German government and the German state of Saxony.

The company plans to end production of 200mm wafers at Dresden in the second half of 2007. By the end of that year it will begin manufacturing 300mm wafers at Fab 30 -- which will be renamed Fab 38.

The plant will reach full capacity by the end of 2008, when the Dresden plants will be able to produce up to 45,000 of the 300mm wafers per month, AMD said.