Days before Intel (INTC) - Get Report releases its most significant processor upgrade in years, the company feted the opening of a new chip factory that will play a critical role in the company's comeback plan.

CEO Paul Otellini visited Leixlip, Ireland, on Thursday to commemorate the launch of one of Intel's most advanced fabrication facilities, capable of producing chips with 65-nanometer circuitry. The $2 billion fab is the first in Europe to produce 65-nanometer chips in high volume and the third in Intel's stable of 14 chip factories worldwide.

"Intel is establishing a clear technology lead with our next generation of dual-core processors based on the Intel Core microarchitecture," Otellini said in a statement. "Our manufacturing capability is key to fueling Intel's success."

Otellini also announced that Intel's manufacturing operations have officially "crossed over," producing the majority of the company's processors at 65 nanometers, rather than the older 90-nanometer circuitry.

The Santa Clara, Calif.-based chipmaker is set to launch a trio of new processors this summer, all of which will feature 65-nanometer circuitry. Woodcrest, the code name of the microprocessor designed for corporate servers, will lead the pack when it is released Monday.

With smaller circuitry, Intel can cram more transistors on each chip. This reduces the manufacturing costs and allows Intel to offer more functionality or computing horsepower on each chip.

Advanced Micro Devices

(AMD) - Get Report

, whose processors have been hailed as the performance and energy-efficiency leaders for the past year, is currently producing the majority of its chips with less-advanced 90-nanometer circuitry. The company says it expects to begin volume production of 65-nanometer chips in the fourth quarter.

Many expect Intel to use its manufacturing advantage to wage a price war with AMD and reverse some of its recent losses in market share. According to Mercury Research, Intel chips represented 74% of the overall market for x86 chips at the end of the first quarter, while AMD had 21% share.

Tom Franz, the general manager of fab manufacturing at Intel, said the 65-nanometer fabrication facilities combined with Intel's chip designs, position the company to achieve significant growth.

"It's another milestone in putting us ahead of other semiconductor companies," said Franz.

Intel already has a pair of fabs producing 65-nanometer chips in Oregon and Arizona, and the company has plans to bring online a fourth 65-nanometer fab in Oregon later this year.

The Irish fab, officially known as Fab 24-2, was completed last year and began manufacturing its first chips at the beginning of this year.

Franz said the fab was now in volume production, cranking out thousands of 300mm wafers a week -- more than halfway above the facility's total potential capacity. He said the factory should be fully ramped by the end of the year.