With competition for PC microprocessors getting fiercer, Intel ( INTC) is increasing its manufacturing capacity. The world's largest chipmaker announced Monday that it is investing $650 million to boost the output at its chip factory in Rio Rancho, N.M.

According to Intel, the money will be invested in chip-making equipment that uses 300-millimeter wafers, which allows chipmakers to create more chips per wafer, thus lowering production costs and diminishing overall use of resources.

"Today's announcement signals another important addition to one of Intel's pre-eminent U.S. manufacturing sites, and better positions us to meet customer requirements," Intel President and CEO Paul Otellini said in a statement. "Additional 300mm wafer manufacturing capability helps improve the overall cost-effectiveness of our worldwide manufacturing network. Investing in an existing manufacturing site allows us to take advantage of our highly skilled workforce in New Mexico."

The Santa Clara, Calif., chipmaker reported $11.95 billion in cash and short-term investments in its third-quarter earnings report. Intel's stock was down 14 cents, or 0.6%, to $23.01.

Earlier this year, Advanced Micro Devices ( AMD) beat Intel to market with high-performance dual-core microprocessors, presenting the first serious challenge to Intel's longstanding performance advantage. Intel also faced capacity constraints earlier this year when it was unable to produce enough chipsets, the components that work alongside microprocessors, to meet customer demand.

Intel already uses 300-mm manufacturing in parts of the New Mexico fab, as well as at facilities in Oregon and Ireland. Chip production with the new equipment is slated to get under way in 2007.

More from Technology

50 Stocks That Could Be Shredded If a U.S. Trade War With China Ignites

50 Stocks That Could Be Shredded If a U.S. Trade War With China Ignites

Trump Puts Tech in Trade War Crosshairs With Planned Curb on China Investment

Trump Puts Tech in Trade War Crosshairs With Planned Curb on China Investment

These 5 Tech Giants Still Aren't That Expensive

These 5 Tech Giants Still Aren't That Expensive

Intel CEO Brian Krzanich's Ouster Proves CEOs Aren't Above the Rules

Intel CEO Brian Krzanich's Ouster Proves CEOs Aren't Above the Rules

Amazon, Microsoft and Google Face Backlash over ICE, Military Deals

Amazon, Microsoft and Google Face Backlash over ICE, Military Deals