The investment assistance, worth approximately 545 million euros ($684 million), is the highest benefit permissible under the grants and subsidy schemes of the EU, the chipmaker said. In November, the company, adjacent to its existing plant in Dresden in the German state of Saxony.
The amount offered by the German government was one of the factors in the chipmaker's decision on where to locate the facility. AMD has said it expects to spend $2.4 billion over the next four years to construct and later upgrade the plant. It expects to begin volume production of chips there in 2006.
The new facility will use 300-millimeter wafers--the disks that chips are produced on--in an effort to increase unit volume and cut costs. It will eventually turn out chips at the 65-nanometer level, AMD has said. The company is currently producing 130-nanometer chips and hopes to move to 90 nanometers this year, at roughly the same time as other chip leaders. (A nanometer is one-billionth of a meter, and the measurements refer to the size of the features inside each chip.)
"With this approval, our new project has passed a key financial milestone as we begin the process of building, equipping and ramping the new fab," Bob Rivet, chief financial officer of AMD, said in a statement.