EU genehmigt Subventionen für AMD

Commission approves aid in favour of AMD Fab 36 LLC & Co. KG in Saxony, Germany

Today, the European Commission approved investment aid to be granted for the setting up of a microprocessor production site in Dresden Saxony. Production at this site shall start in 2005 and full capacity should be attained in 2007. The beneficiary of the aid is to AMD Fab 36 LLC & Co. KG in Dresden (Saxony). The aid authorised covers 22.67% of total investment costs of roughly ? 2.4 billion. The new site will create about 1035 jobs directly with the firm and additional 1170 jobs in the region of Saxony. As the aid is limited to 22.67 % gross of the eligible investment costs and the market for microprocessors is not in decline, the public grants will not lead to an undue distortion of competition.

In assessing the compatibility of the proposed investment aid, the Commission took into account whether:

- the market for microprocessors is expanding or in decline;

- the number of jobs directly created by the project; and

- the beneficial effects of the investment, i.e. indirect job creation in the assisted

region.

In the present case the Commission concluded that the market for the production of microprocessors had expanded in the past and showed good prospects for further growth. In addition, the amount of direct and indirect jobs created led the Commission to calculate an allowable maximum aid percentage of 31.5 % gross of the eligible investment costs for the site. In the present case, the envisaged aid intensity of 22.67 % gross is within the maximum. The Commission could therefore approve the aid intensity.

Background on the criteria for approving aid for large investment projects
The intended aid to Fab 36 falls within the scope of the 1998 Multisectoral Framework on regional aid for large investment projects (the ?1998 MSF?). According to the 1998 MSF, the Commission has to approve the intensity for any large investment project whose envisaged aid volume exceeds ?50 million. The need for prior approval in favour of large investment projects results from the fact that large amounts of aid have a larger competitive impact and that large investment projects are less affected by specific regional problems.

With respect to the production of microprocessors, the Commission had to carry out an analysis whether this market was characterised by structural over-capacity or not. State aid in favour of undertakings in markets characterised by over-capacity entails serious risks for competition.

Any new capacity investments that are not compensated by capacity reductions elsewhere will exacerbate the problem of structural over-capacity and shift the issue to other suppliers. However, in the present case the data at the Commission?s disposal reveal that the average annual growth rate of the microprocessor market from 1997 to 2002 of 5.14 % in value has been well above the average annual growth rate of the manufacturing industry as a whole in the EEA (4.8 %). In addition, the estimated figures for the years 2003 - 2006 show that the prospects for the market are excellent with an expected growth rate of 17.71 % in value. The Commission therefore concludes that the market is not in decline.

Therefore, and in light of the direct and indirect jobs created, the Commission approved the aid that was notified by Germany in November 2003.

The beneficiary of the aid, Fab 36, is a newly incorporated enterprise that will be engaged in the production of high-performance microprocessors. Microprocessors are specific logic chips and are key for the functioning of PCs and notebooks. AMD envisages producing microprocessors on the basis of a new 65nm-technology and according to new technologies via the use of 300mm-wafers.