AMD turns to Chartered for help

Advanced Micro Devices is building a new plant in Germany but still needs outside assistance to meet expected demand.

Advanced Micro Devices has chartered a new chip manufacturer.

The Intel rival known for its Athlon PC and Opteron server processors announced on Tuesday plans to tap Chartered Semiconductor Manufacturing, a contract manufacturer, for extra chip-production capacity.

The two companies signed a manufacturing and technology-sharing agreement under which Chartered will produce Athlon 64 and Opteron chips starting in 2006 to help AMD meet expected demand. Singapore-based Chartered will use AMD Automated Precision Manufacturing software, which AMD created to better manage its chip manufacturing processes.

AMD's share of the PC processor market inched up to 15.8 percent during the third quarter. AMD generally aims to take a larger piece of the PC and server markets from rival Intel and thus expects to need more production capacity over time.

Sunnyvale, Calif.-based AMD feels the need for additional capacity that Chartered can offer--despite the fact that AMD is building a new processor factory of its own. The new plant, dubbed Fab 36 , will sit alongside AMD's existing Fab 30 in Dresden, Germany.

The new plant, which AMD has estimated will cost about $2.4 billion to build, is scheduled to begin volume chip production in 2006, AMD has said. Previously, AMD had planned to build a 65-nanometer plant with UMC, another Singapore-based chip foundry. But the agreement never came to fruition , and the two companies parted ways.

"AMD has...the best technology, and now with this relationship, the incremental capacity to fulfill our planned volume demands," Dirk Meyer, executive vice president of AMD's Computation Products Group, said in a statement. "We believe that all of our customers around the globe will benefit from this relationship."

For its part, Chartered has inked a number of technology and capacity-sharing deals in recent years, including working with IBM. In 2002, Chartered and IBM signed a pact that included developing chip manufacturing processes together and sharing manufacturing capacity. IBM and AMD also work together on chip development .

The numerous partnerships between chipmakers underscore the massive costs associated with their industry. Because many billions of dollars are required for semiconductor research and development, as well as building new plants, the companies often seek to share those costs.

Chartered said it will begin adding AMD's APM software into its Fab 7, a plant in Singapore, before the end of the year.

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