AMD Gets in a New York State of Mind

Could Advanced Micro Devices(AMD) love New York?

Reports are rampant that the chipmaker is considering building a new chip factory in New York -- a notion that seems hard to imagine, given that the ink has just dried on AMD's announcement of a $2.5 billion project that should easily accommodate its manufacturing needs for the next several years.

That hasn't quieted a chorus of voices in New York from contending that the chipmaker, which is in a heated battle to steal market share from Intel(INTC), is scouting the region for a new chip-fabrication facility.

In recent news reports, two New York politicians have confirmed that officials from Sunnyvale, Calif.-based AMD have visited New York to discuss building a fab at various locations in the state.

AMD spokesman Jon Carvill says that the company has not made any announcements about the location of its next fab, and that the decision about when it will construct another manufacturing facility will be based on timing and market demand.

"We haven't made any commitment to what the timing and market perspective will be," says Carvill.

AMD needs as much manufacturing capacity as it can get to achieve its publicly stated goal of capturing 30% of the market for microprocessors in the next couple of years (AMD had 21% market share at the end of this year's first quarter, according to Mercury Research).

But according to some industry analysts, AMD's recently announced plans to upgrade and expand its manufacturing operations in Dresden, Germany, should be enough for the company to meet that goal.

Additionally, AMD has a deal in place with third-party chip manufacturer Chartered Semiconductor Manufacturing(CHRT), giving AMD extra manufacturing capacity should demand prove better than expected.

Building an entirely new fab for more capacity would seem not only superfluous, but also incredibly risky, given the high costs involved, the fears of an industrywide chip glut and the increasingly fierce competition in the microprocessor market.