AMD expanding facilities in China

The company has plans for a new factory, which will be located next door to an existing AMD flash memory plant in China's Suzhou Industrial Park.

China is increasingly becoming a location of choice for these types of finishing operations because of lower operational costs there. Labor, electricity, power and other such expenses can be a substantial percentage of the overall outlay for testing and packaging facilities.

By contrast, operations that actually process silicon involve expenses related to building the physical plant and buying equipment. As a result, local tax breaks are a larger factor than labor costs in determining where to build, and many manufacturers erect "fabs," or fabrication plants, in relatively costly labor markets. AMD, for instance, will build its next fab in Dresden, Germany.

Costa Rica, the Philippines and Malaysia are also leading centers for testing facilities.

Additionally, demand for chips is growing in China, so performing some tasks there can cut down on transportation or, potentially, reduce tax costs--China is currently in dispute with the United States over a tax that leads to a surcharge on finished chips imported into China.

The new AMD facility, which will occupy approximately 11,000 square meters, is expected to be in operation and volume production in the fourth quarter of this year.

Over the next several years, approximately 300 employees are expected to be hired locally to staff the facility.

"This second state-of-the-art facility in Suzhou is another key milestone for AMD's expansion in China," Karen Guo, corporate vice president and general manager of AMD China, said in a statement. "With one of the world's hottest chip markets, an abundant labor force for skilled manufacturing and world-class engineering talent, China is a natural choice for AMD's microprocessor manufacturing.

Wang Dan of ZDNet China reported from Beijing. CNET News.com's Michael Kanellos contributed to this report.