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Costing $3.5 billion, the new fab is set to open in 2010

Earlier this month, DailyTech brought you details about AMD's plans to open a fabrication facility in the state of New York. Although details at the time was sketchy and most of the information was unconfirmed, AMD's chairman Hector Ruiz this week announced that AMD will indeed be opening a facility in New York's Luther Forest Technology Park in Saratoga County.

AMD is expected to be spending upwards of $3.5 billion by the time the plant is finished. The plant is going to be home to more than 1000 employees and AMD says it should be completed sometime in 2010. In previous reports circulating online, it was indicated that New York state had been busy putting together an incentive package for AMD worth somewhere around the $1 billion mark. For New York state, having AMD build a new facility will introduce a big boost for the economy -- new jobs are created and the state gets more taxes. AMD is investing a lot into expansion recently, as the company also announced plans to spend roughly $2.5 billion to increase capacity at its Fab 30 facility in Dresden, Germany.

On the other side of the fence, Intel is making an effort to expand as well. Being AMD's biggest competitor, Intel announced too that it would build a new facility in Europe. Spending about $2 billion, Intel will open its first 65nm facility in Europe. Called Fab 24-2, it will be a major expansion on Intel's existing Fab 24 and will bring 300mm wafer production into the production line. Intel says that Fab 24-2 will be one of its largest.



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Let's look at that per-job cost, shall we?
By masher2 (blog) on 6/24/2006 11:32:53 PM , Rating: 2
Let's see, a grand total of 100 new jobs...and New York had to give up $1B in incentives to get them. That works out to $10M per job. Or, more than the total salary every worker will make their entire lifetime.

Yeah...AMD was dying to bring those jobs to the USA.




RE: Let's look at that per-job cost, shall we?
By Viditor on 6/24/2006 11:38:11 PM , Rating: 2
quote:
Let's see, a grand total of 100 new jobs...

Ummm...it's 1000+ new jobs, and taxes generated from sales, property, transportation, utilities, communications, etc... will pay NY back in spades.


RE: Let's look at that per-job cost, shall we?
By masher2 (blog) on 6/25/2006 12:02:53 AM , Rating: 2
> "Ummm...it's 1000+ new jobs,"

Sorry, misread. So $1M per job.

> "...and taxes generated from sales, property, transportation, utilities, communications, etc..."

Sales tax only applies to units sold in the state...and that's paid regardless of where the chips are manufactured, so count that out. As for utilities, thats a net loser for the state...additional power loads are always extremely costly in capital outlays for generating capacity (why do you think most power companies pay people to convert appliances to models which use *less* electricity?)

Not sure what taxes you believe AMD is going to be paying in transportation. State taxes on "communications" are low enough to be nonexistent.

No, the only real taxes that count are property taxes and one you didn't mention...assets and inventory. Taxes that, for a $3.5B facility, are going to take decades to recover a billion dollars.


RE: Let's look at that per-job cost, shall we?
By Viditor on 6/25/2006 12:37:15 AM , Rating: 2
quote:
Sales tax only applies to units sold in the state...and that's paid regardless of where the chips are manufactured

Sales tax on supplies for the Fab...which will be extensive.
quote:
As for utilities, thats a net loser for the state...additional power loads are always extremely costly in capital outlays for generating capacity (why do you think most power companies pay people to convert appliances to models which use *less* electricity?)

Actually, the State wins on utilities...remember that the power is privately owned and operated, and the state collects taxes there too.
quote:
Not sure what taxes you believe AMD is going to be paying in transportation

Taxes on transport of supplies shipped in and goods shipped out.
quote:
the only real taxes that count are property taxes and one you didn't mention...assets and inventory. Taxes that, for a $3.5B facility, are going to take decades to recover a billion dollars

If you add all of the tax revenue together, it will be substantial.


RE: Let's look at that per-job cost, shall we?
By masher2 (blog) on 6/25/2006 11:28:49 AM , Rating: 2
> "Sales tax on supplies for the Fab...which will be extensive."

Um, AMD will be purchasing the vast majority of those supplies from out of state. Meaning that, unless the supplier has an in-state presence, AMD won't be paying sales tax.

> Actually, the State wins on utilities...remember that the power is privately owned and operated, and the state collects taxes there

Oops, I'm pretty sure this facility will be powered by the New York Power Authority (NYPA), which is a STATE-owned organization.

> "Taxes on transport of supplies shipped in and goods shipped out. "

Taxes on transport? State tax on diesel fuel is about it. And a chip fab doesn't ship anywhere near the bulk of material that most equivalent-sized industrial facilities do.

> "If you add all of the tax revenue together, it will be substantial"

Sure. Probably in excess of $50 million per year. That works out to a 20-year payback period. And actually, the situation is worse, as I'm sure the state will incur some hefty infrastructure charge for this facility. New roads alone will probably eat up the tax revenue for the first year.

Will this Fab be around long enough to ever hit payback? I haven't seen an analysis...however, I know many similar incentive packages were large net LOSERS for the State. The politicians sign off on them so they can claim some positive job growth for the state, knowing they'll be long out of office before the final tally is ever made.



By NT78stonewobble on 6/26/2006 3:04:52 AM , Rating: 2
Well I can only believe that in the end having both jobs, a major tech manufacturing center and extra traffic in any given area will be a plus.

Now the initial tax break AMD is getting isn't a net expence for the state. Since without it there wouldn't be an amd plant to tax.

You mention roads will cost a lot. As you urself say that the goods transportation from that type of factory is considerably smaller than comparable sized factories.

So in this case for x number of jobs you actually get less trucks on your roads.

I can't really imagine how many more roads a "small" factory like this can need? Now my parents work at a factory with about 6-700 employees. That place and a some others (i'd say about 1500+ jobs are all fed from an existing public / industry area road.

Regarding power. That it's state owned is actually a plus too. The state can turn up the price for industry power usage. If the plant turns out to be a major user it will also become the major payer.?!?

In any case any income generated will go directly to "NYPA" (again a plus for the state) and not end up as profits for some out of state power company.


By NT78stonewobble on 6/26/2006 3:08:37 AM , Rating: 2
Wasn't meaning to "ditch" your oppinions and views wich are very valid. But theres allways two sides.


RE: Let's look at that per-job cost, shall we?
By smokenjoe on 6/26/2006 3:27:44 AM , Rating: 2
That kind of plant is somthing that a local buisness man or politition would kill for. High paying jobs and a high profile buisness that could help attract other buisness that are also big investors and spenders. Dont forget that the high paid workers are going to spend more mony in the economy causing more jobs and more taxes If there is much unenployment at all there could be a lot of people who are being supported by tax dollers pay taxes. Dont forget that all the people that have jobs because the plant workers spend mony on things will also spend mony themselves on food dining houses etc.

Seriously some economists think that there is a 4xs effect so they can tax the people that serve the people that serve the plant workers and reasearchers.

http://en.wikipedia.org/wiki/Multiplier_%28economi...


By masher2 (blog) on 6/26/2006 9:14:37 AM , Rating: 2
> "High paying jobs and a high profile buisness that could help attract other buisness "

Sure; they're hoping for a trickle-down effect. My original point was that there was no way the direct effects of the plant would ever pay back the billion-dollar incentive package.

> "That kind of plant is somthing that a local buisness man or politition would kill for..."

Sure, it benefits both of them a great deal, even if it costs the average citizen a small fortune. Again, I'm not saying its the case here, but its happened before.



RE: Let's look at that per-job cost, shall we?
By masher2 (blog) on 6/26/2006 9:11:21 AM , Rating: 2
> "Well I can only believe that in the end having both jobs, a major tech manufacturing center and extra traffic in any given area will be a plus."

Sure it will. I just wonder if it'll be worth the price tag. As I said-- it very well could be, but I've seen other cases where myopic politicians went overboard on incentive packages.

> "You mention roads will cost a lot. As you urself say that the goods transportation from that type of factory is considerably smaller than comparable sized factories."

True...but you need the roads whether they're used by one truck a day or one hundred.

> "I can't really imagine how many more roads a "small" factory like this can need?"

In most cases, a facility this size is located on new development, which means roads must be built *to* it. Take the case of your parents factory, for instance. Unless its very small and was built within an existing industrial park, I strongly suspect the "existing" public road was constructed when the factory was.

> "Regarding power. That it's state owned is actually a plus too. The state can turn up the price for industry power usage"

Legally, they cannot charge this plant more than any other industrial user. And if they charge them all a rate too much higher, they drive industry out of the state.

New generating capacity is hugely expensive, and takes decades to amortize. This is why every power company in the nation (even state-owned ones) advocate you actually use LESS of their product, not more.



By Zoomer on 6/28/2006 11:02:19 PM , Rating: 2
The roads built to serve the plant is fine. There will be more investment around the plant (diners, housing, cinemas, malls, other entertainment, sports, hotels (for visiting company execs?), cleaning services, etc. These workers may have families. So schools, R&Rs, etc. The new facilities would attract even more workers.

Besides, there would be companies setting up shop besides the plant to provide goods or services to it. For example, transportation companies, packing material suppliers, the fab equipment's manufacturer's office for tech support or servicing when sometimes goes wrong, etc.

I believe economists call this the multiplier effect.


By Murst on 9/28/2006 3:56:13 PM , Rating: 2
Do you not realize that NY is not paying 1B to AMD? Your entire argument is based on the assumpting that somehow the state of NY is giving AMD 1 billion dollars to build something.

The package is most likely incentives. Most of the 1 billion package is most likely tax breaks. The state doesn't spend a dime on stuff like that. And if the incentive program wasn't there, the fab would be built somewhere else, hence no gain whatsoever to the state of NY.

You people need to realize that when the state creates a package for a business to develop in the area, they're not sending a $1B check to the CEO.


The wisdom of spread
By crystal clear on 6/24/2006 3:19:01 PM , Rating: 2
Both Intel/AMD recognize the 2 major markets namely-the USA
Canada on this side & EU/plus other non EU countries in Europe.
They have to have production centres close to these markets.
If one may observe too much of concentration of production
faciities in Taiwan is dangerous.Taiwan is eartquake prone &
one major earthquake as we saw in the past ,will play havoc
with whole computer industry.
China/India have become a political liability- people &
politicians in the USA/EU have a strong dislike for these
countries.Just too many jobs have gone away to India/China.
So wisdom says spread your production facilities all over-
for many reasons/advantages.
You may quote 10s of reasons of advantages for locating in
India/China but people in USA/EU cannot be unemployed for
the sake of company profits.Hard hitting reprisals are the
last thing Intel/Amd want from these major markets.




RE: The wisdom of spread
By techfuzz on 6/24/2006 3:46:54 PM , Rating: 2
quote:
So wisdom says spread your production facilities all over-for many reasons/advantages.


Another major reason being a large pool of available scientists and engineers required to staff these fabs is concentrated in the US and Europe. That's not to say there isn't any in other places, but its most certainly concentrated and of a higher overall caliber in the US and Europe.

quote:
Sweet, jobs are getting outsourced to America for once! I can find work again!


It's not outsourcing when the company is based in the US, it's called insourcing :)


RE: The wisdom of spread
By Missing Ghost on 6/24/2006 6:56:07 PM , Rating: 2
I think they are based in Germany.


RE: The wisdom of spread
By glennpratt on 6/24/2006 10:09:49 PM , Rating: 2
Wow... Why guess when you have the internet? Sunnyvale, California of course. Or were you joking?


.
By hans007 on 6/24/2006 6:38:22 PM , Rating: 2
is amd, crazy?

have you seen their stock financials. they have maybe a billion in cash period.

i hav eno idea how they are going to afford these plants, but well.. if say intel well kicks their ass in the next 2-3 years and they stop making money these plants wont even get finished being built.

i love how it says 2010. fabs take maybe 2 years to build (thats how long fab30 took) so in reality they can cancel this any time in the next 2 years if they dont have the cash to pay for it.




RE: .
By bbomb on 6/24/2006 7:23:48 PM , Rating: 2
Companies dont spend just money they have. They get lines of credit and spend that credit while keeping some cash on hand. I dont know of any major company that uses cash only.

OT: Has Taiwan, Hong Kong, and China run out of space for massive plants now?


RE: .
By crystal clear on 6/24/2006 8:59:23 PM , Rating: 2
"OT: Has Taiwan, Hong Kong, and China run out of space for massive plants now? "
They have run out of political goodwiil-"Bring those jobs
back home (USA/EU)" is the message CEOs are getting.
USA/EU are huge markets & they have the power to do some
arm twisting,if the CEOs dont take the hint.
THATS BUSINESS.


RE: .
By Viditor on 6/24/2006 11:34:28 PM , Rating: 2
quote:
have you seen their stock financials. they have maybe a billion in cash per

As of last quarter, AMD had $2.63 Billion in cash. This almost definately much higher this quarter.
http://finance.yahoo.com/q/ks?s=AMD


Does this mean..
By Deathspawner on 6/24/2006 11:29:26 AM , Rating: 2
..that we should be seeing quicker releases, and lower prices on these shores?




RE: Does this mean..
By mrkun on 6/24/2006 11:35:25 AM , Rating: 2
Perhaps the former.


AMD's first 32nm fab
By masher2 (blog) on 6/26/2006 10:21:17 AM , Rating: 2
This fab will come online in 2013 or 2014...and will be AMD's first 32nm fab. Does this mean we can't expect 32nm from AMD for another 8 years?




RE: AMD's first 32nm fab
By Viditor on 6/26/2006 9:54:39 PM , Rating: 2
quote:
This fab will come online in 2013 or 2014

Ummm...2010. And yes, 45nm in 2008, 32nm in 2010.


By Fox5 on 6/24/2006 11:39:41 AM , Rating: 2
Sweet, jobs are getting outsourced to America for once! I can find work again!




Union Grad Here
By flyboy84 on 6/24/2006 9:43:45 PM , Rating: 2
I just graduated with an EE degree from Union a few weeks ago :) I'll be moving to NY's Southern Tier to work for Lockheed Martin, but it's exciting to see the "Tech Valley" thing start to come true. Maybe one day I'll return to the Capital District at AMD!




By MoonSword on 6/24/2006 1:15:29 PM , Rating: 2
Too true. I've lived in NY all my life (coincidentally, not far from Malta, where the AMD plant is to be built), and the three men that run the state (Governer George Pataki, Senate majority leader Joseph Bruno, and Legislative majority leader Sheldon Silver) keep raising taxes and misspending the money for pork and political gain. Not just businesses, but everyone feels the pinch. It's simply a bad situation created by bad government. It is no wonder that the cost of living in NY is way above the national average.

I have two concerns. One: Where is AMD going to find the talent? Not SUNY (State University of NY). The closest SUNY college to Malta is SUNY Albany, and their computer science cirriculum is a complete joke. I know because I attended. I spent $15k and two years at SUNY Albany and came out even more ignorant than when I started... at least another college was able to get me back up to speed, well enough where I graduated magna cum laude in comp-sci. Some have noted that SUNY Albany built that chip R&D center, but for what? Their comp-sci dept has the highest turnover of dropouts/transfers in the whole university! No surprise considering how horrible the cirriculum is.

Perhaps local private Colleges like RPI, Union, Siena, and St. Rose may be able to provide. God knows upstate NY has a lot of private colleges.

But my second concern is that this deal, should it happen, may inevitably screw over Malta just like GE did to Schenectady years ago. It's not wise for a community to put so much of their dependancy on a single large corporation, for should that corporation decide to cut jobs and move the majority of its work force out of state (as GE did), the massive economic loss may very well turn the town into a dump (as Schenectady has).


By AncientPC on 6/24/2006 2:08:57 PM , Rating: 2
I don't think you need to worry too much about where the engineers will come from. People will go where the jobs are, and in recent times America's population has been migrating towards the sun belt states. We've seen a population explosion in Dallas, Atlanta, etc.

I'm sure many people will relocate to NY if they get jobs at the new fab plant.


By Icepick on 6/24/2006 5:30:12 PM , Rating: 2
I live near Malta too and am happy to see a major player invest so much in this area. It's refreshing to see companies move into the capital district and not out of it.

As far as the talent pool there is plenty of it around here. You can bet that graduates from colleges like RPI and Union will find employment there. Additionally, people are relocating to the Albany area from NYC all the time. There are also plenty of immigrants moving here from over seas. There will be NO problem staffing the new plant.

Hopefully this will start a chain reaction that will finally bring some good jobs to this area.


By CompMan86 on 6/24/2006 6:12:29 PM , Rating: 2
Don't forget Cornell :-)


By mpc7488 on 6/24/2006 11:15:33 PM , Rating: 2
Don't forget RIT, UofR, Clarkson and RPI, there are a slew of engineers available. I do agree with you on the taxes though, I can't imagine the breaks that AMD must be getting to agree to locate here. Maybe Spitzer will shakes things up, but NY will always be a high tax bracket area.


By Zoomer on 6/28/2006 10:50:05 PM , Rating: 2
How good are these colleges really?

There are so many that it seems like an oversupply of universities.


By drwho9437 on 7/24/2006 1:58:08 PM , Rating: 2
Ummm. How can there be an oversupply? Lots of people come from out of state. RPI and Cornell are certainly considered very good (Cornell use to supply Bell Labs with all their PhDs). If NY people are looking for jobs for the state economy that might not happen directly, as companies like AMD recruit everywhere, but a good paying eng job no doubt helps local economy via a trickle down.


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