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Dresden plant powers AMD surge

From its factory in Germany, the chipmaker is waging a war of manufacturing efficiency against rival Intel.

4 min read
A sprawling computer chip factory near the war-scarred German city of Dresden is forcing a shift in momentum in the battle between two U.S. technology superpowers.

Advanced Micro Devices' $2.5 billion plant houses a collection of high-tech manufacturing tools and automation processes that industry experts say rivals or beats those of the company's much larger archenemy, Intel.

From that factory, which started producing microprocessors in 2000, AMD is waging a war of manufacturing efficiency to grab market share. Experts say the Sunnyvale, Calif., company has turned the corner on a history of missteps, opening up its best-ever opportunity to take on the industry leader.

"AMD has systematically matched and even exceeded the best with as little as a tenth the resources," Dan Hutcheson, chief executive of Santa Clara, Calif.-based VLSI Research, said in a recent note to clients.

Despite Intel's recent stumbles, including last week's bombshell revenue warning, AMD is still a long way from winning the battle for market share in the $30 billion business of making microprocessors, the brains of a computer.

Intel, the world's largest chipmaker, earns more than 90 percent of the dollars spent on microprocessors and far outspends AMD on manufacturing. AMD itself concedes it probably won't be able to grab more than a 25 percent share until as late as 2009.

Peter Glaskowsky, a former chip industry analyst who recently joined a Silicon Valley start-up, said Intel's manufacturing facilities, known as fabs, are still the gold standard in the industry.

"I think AMD would happily trade fabs and people with Intel," he said.

Still, AMD is giving Intel a tougher fight.

Based on the success of the Dresden plant, the company is building a new facility next door that only escalates the fierce fighting with Intel.

And some statistics show momentum building for AMD. A bigger mix of higher-priced Opteron server chips has given the company an 8.5 percent share of microprocessor spending in the second quarter, up from 7.3 percent a year earlier, according to IDC, a Framingham, Mass.-based market research firm.

Moreover, AMD built the first Windows-compatible chip that uses a technology called 64-bit computing. It also beat Intel in showing off the next big advance in semiconductor making, which puts the power of two chips into a single package.

Following AMD is not an everyday occurrence at Intel, which has long boasted the most powerful arsenal of chip technology ever assembled--11 manufacturing plants worldwide, six assembly and test facilities, and a research budget upward of $4 billion, more than AMD's total sales.

For years, the prowess of Intel's factories has been unrivaled, while experts had written off AMD as occasionally sloppy and always trailing in manufacturing milestones.

But the Dresden site, known as Fab 30, has become a beacon of pride for AMD, and the new plant, Fab 36, will be able to process larger silicon wafers that yield more than twice the number of microprocessors.

The crown jewel of Fab 30, AMD says, is its use of computer software to make decisions that improve efficiency and fix problems with little or no human intervention.

Meanwhile, an on-site team of engineers synthesize the data pouring in from the factory tools to find other improvements.

Those tools help AMD overcome the disadvantage of having only a single factory to build microprocessors, a situation that offers little leeway for experimentation.

"We can now stay on par in terms of technological change," said Thomas Sonderman, AMD's director of automated precision manufacturing technology.

By contrast, he said, Intel's strategy of building one factory that works and then copying it is outmoded in a time when chip makers must adapt quickly to churn out increasingly complex products.

"It's kind of like Emerson's quote, that foolish consistency is the hobgoblin of little minds," he said.

But Intel says its far larger footprint of factories gives it a huge advantage for improving manufacturing processes without interrupting high-volume factory lines. "You only have to look at the numbers," said spokesman Robert Manetta. AMD, he said, is "constantly trying to keep up."

That may be changing. Over the summer, ZDnet Germany, a unit of CNET Networks (the publisher of News.com), found that AMD's Athlon 64 chip beat Intel's Pentium 4 in a test of mainstream office software, Internet applications and 3D video games.

Coming out arguably on top of Intel and leading the way with 64-bit computing may portend a shift in the largely lopsided battle between the two chipmakers.

"It's an incredible role reversal for AMD and Intel," said Kevin Krewell, editor-in-chief of The Microprocessor Report, a technical publication. "Intel's always led the way."

Story Copyright  © 2004 Reuters Limited.  All rights reserved.