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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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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.


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