Ruiz: Looking ahead

San Francisco, May 29 (Reuters): Advanced Micro Devices Inc, the No. 2 maker of microchips for personal computers, said on Monday it will spend an additional $2.5 billion to upgrade and expand its two factories in Germany.

The expansion comes as AMD steadily gains market share from larger rival Intel Corp and highlights the company’s desire to prove that its once-crippling supply problems are things of the past.

It also comes on the heels of the announcement this month that Dell Inc will start using AMD chips in high-end servers for powering business networks, fuelling expectations that the world’s top PC maker will offer more AMD products in the future.

“As global demand continues to rise for AMD products, we are scaling our manufacturing capacity intelligently to meet our customers’ growing needs,” AMD chief executive Hector Ruiz said in a statement.

The money, to be spent over three years, will be used in part to overhaul AMD’s first chip factory in Dresden, Germany, known as Fab 30, refitting it with equipment to handle larger silicon wafers that will yield more than twice as many processors as existing machinery. The factory will be renamed Fab 38.

AMD will also expand capacity at its new, second Dresden facility, Fab 36, which began producing test chips last month and is gearing up for volume production soon.

In addition, AMD will build a new “clean room” next year where final preparation of wafers for both factories will take place. Building a separate clean room facility will free up more production space in the Fabs, AMD said.

Chipmakers are gradually adopting the latest manufacturing techniques that cut chips from wafers 300 mm across, about the size of a 12-inch dinner plate. That yields double the amount of chips the 200-mm wafers previously used.

AMD said the expansions would let its Dresden facilities process a combined 45,000 300-mm wafers per month by the end of 2008.

The Sunnyvale, California-based company also has a deal with Singaporean contract chipmaker Chartered Semiconductor Manufacturing Ltd to make its microprocessors.