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Brussels, 18th July 2007

State aid: Commission endorses €262 million aid to AMD for large investment project in Dresden, Germany

The European Commission has authorised, under EC Treaty state aid rules, €262 million of aid, which the German authorities intend to grant to AMD for the conversion and extension of its existing micro-processor wafer plants in Dresden. The Commission's assessment found the measure to be compatible with the Single Market, as it meets the requirements of the applicable Regional Aid Guidelines of 1998 and the rules for regional aid for large investment projects of 2002 (see IP/02/242). The investment project of €2.2 billion into the high-tech sector by AMD will significantly contribute to the further regional development of Saxony.

Competition Commissioner Neelie Kroes said: “I am pleased to approve aid for an important investment project in a high tech sector which will contribute to regional development and job creation in a disadvantaged region of Germany.”

AMD's investment project is aimed at converting and extending the existing plant for the production of micro-processor wafers (front-end manufacturing). The investment project involves eligible costs of €2.2 billion and an aid amount of €262 million.

The production process of microprocessors can be divided in two phases: front-end manufacturing of microprocessor wafers and back-end processing into microprocessors. Wafers are thin slices made out of silicon cylinders, coated with multiple layers of different materials. Front-end manufacturing represents the main added value of the production chain (around 90%) and takes several months. Back-end processing involves the separation of the microprocessors from the wafers, assembly and final tests. Back-end processing is typically carried out by companies in the Far East and takes a few weeks.

The project is to be carried out in the region of Sachsen, a disadvantaged area eligible for regional aid under Article 87(3)(a) of the EC Treaty. The project intends to create about 565 additional jobs.

The aid would be granted under aid schemes previously approved by the Commission, the most recent being the 2007 Investment Premium Law (IP/06/1704). However, due to the large amounts of aid involved, the aid to AMD had to be notified to the Commission for individual assessment and clearance.

The Commission’s assessment of regional aid to large investment projects focuses on the market power of the beneficiary and on the production capacity created by the investment on the European market. The Commission found that the relevant thresholds would not be exceeded. AMD's share of the relevant market is less than 25%, both before and after the planned investment. The Commission also verified that the capacity increase generated by the projects would be below 5% of the apparent consumption of the product concerned in the EEA.

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