AMD to Invest $2.5 Billion in Germany

Advanced Micro Devices (AMD Quote) announced Monday it would invest $2.5 billion to expand its two chip-building facilities in Dresden, Germany.

The worldÂ’s No. 2 chip maker, AMD has been gaining on industry leader Intel (INTC Quote). But in order to increase its market share, AMD must bolster its manufacturing capacity and avoid the supply problems that have constrained it in the past.

AMD said Monday it intends to complete a "major transformation" of its existing Fab 30, enabling the facility to make 300 millimeter wafers capable of holding twice as many processors as the 200 millimeter wafers the plant currently makes. AMD plans to rename the facility Fab 38.

The company will also expand 300 millimeter chip production at its existing Fab 36. It plans to complete the projects over the next three years.

AMD had been expected  to make an announcement about a Dresden expansion on Monday, although the details had been a matter of speculation.

AMD's stock received a 10% pop recently after Dell Intel (DELL Quote), the world’s No. 1 PC maker and a longtime Intel-only vendor, announced that it would begin using AMD Opteron processors  in some of its servers.

AMD shares finished FridayÂ’s session up 66 cents at $31.63.