Advanced Micro Devices, the world’s second largest maker of x86 microprocessors, said that it would build a new foundry in New York state in the U.S. The fab will begin operation in 2010 and will cost $3.2 billion.

Preston Snuggs, AMD’s vice president of logic manufacturing operations, told Reuters news agency that the plant will initiate manufacturing in 2010 and will allow AMD to increase manufacturing capacities by 50% when compared to expected 2008 level. The incentives offered by New York include a $500 million grant for construction, $150 million in R&D subsidies to be used over 5 years, and $250 million tax rebates, according to Mr. Snuggs.

AMD has been pretty aggressive in terms of boosting its manufacturing capacities recently, as the company’s chips have been gaining market share away from market leader Intel Corp. In case AMD’s future microprocessors perform as good as today’s offerings when compared to Intel’s products, then with increased manufacturing abilities AMD will have more chances to grab larger market portion.

AMD is likely to produce chips using 32nm process technology on 300mm wafers at the new foundry.

Recently AMD said it was planning to transform the Fab 30, which currently processes 200mm wafers and utilizes 90nm process technology, into Fab 38, which will use 300mm wafers and 65nm process technology. AMD will ramp down 200mm manufacturing in the second half of 2007, with preparation already underway for the ramp of 300mm wafers on 65nm process technology at Fab 38 by the end of 2007.

AMD will also build a new clean room facility on its Dresden campus for Bump and Test requirements, which will support both fabrication facilities. Previously, the clean room facilities for Bump and Test activities were located within Fab 30 and Fab 36. By moving them into a new facility in 2007, AMD has the ability to maximize production space at both Fab 36 and Fab 38. Additionally, AMD will install extra production equipment into the Fab 36.