Update: AMD to build $2.4 billion fab in Germany

Advanced Micro Devices Inc. (AMD) confirmed Thursday that it is building a $2.4 billion microprocessor manufacturing facility, or fab, in Dresden, Germany.

The facility, named AMD Fab 36, will produce chips on 300 millimeter wafers and is expected to employ 1,000 people. Full volume production is scheduled for 2006, the Sunnyvale, California, company said.

AMD said that the expanded manufacturing capacity will enable it to meet demand for 64-bit processors.

The announcement comes after news on Tuesday that Sun Microsystems Inc. will be shipping two new servers based on AMD's 64-bit Opteron processors.

AMD Fab 36 will sit alongside another AMD Dresden fab, where the company said that it benefits from local employee skills and government-backed financial packages.

The new facility is expected to cost $2.4 billion over four years. AMD said that it has arranged external financing and government support worth $1.5 billion. Of the external financing, $700 million will come from bank loans and $500 million is expected to come from grants and allowances from the German government and the German state of Saxony. Additionally, $320 million is expected from equity funding from Saxony and a group of European investors, AMD said.

The building will take up about $400 million of the expected total cost, with the rest for equipment, AMD Chief Financial Officer Bob Rivet said in a conference call with media and analysts about the new fab.

During that call, AMD President and Chief Executive Officer Hector Ruiz gave an updated forecast for when the company will offer volume shipments of chips based on 90-nanometer process technology. Instead of late in the second quarter of 2004, AMD now expects volume shipments in the third quarter, representing "only a two- or three-month slide" in its plans, Ruiz said when questioned about the change in the shipment time frame.

-- Nancy Weil in Boston contributed to this report.