1 February 2002 Chip maker Advanced Micro Devices (AMD) has signed a deal with United Microelectronics (UMC) that will see the Taiwanese foundry making AMD’s popular line of PC and server microprocessors.

The deal will enable AMD to further increase production – and therefore crank-up the competitive pressure on rival Intel – as well as help it migrate to more efficient manufacturing processes, more quickly.

UMC will be able to produce AMD’s chips on 300 millimetre wafers, while AMD says that it is unable to shift from 200 millimetre wafers in its own fabrication facilities before 2005.

Chip giant Intel, which enjoys a share of around 80% of the PC microprocessor market, is already switching to 300 millimetre wafers. This enables it to increase the number of chips it can produce from a single wafer, increasing output and reducing cost.

AMD is partly sheltered by this shift because its Athlon microprocessor is smaller than Intel’s equivalent Pentium 4, so that it can produce more chips per wafer than Intel. New production processes enabling it to make the Athlon smaller will also help.

But a deal with UMC will not only enable AMD to increase production at a minimal extra cost, but also add flexibility because UMC can deploy unused capacity in its foundry business.