Advanced Micro Devices, the world’s second largest maker of x86 chips, will sell its chip manufacturing equipment to a Russian maker of various chips, who will then produce microprocessors for the country’s government and military needs, the company’s Moscow office said Thursday.

According to local reports, AMD will sell Zelenograd, Russia-based Angstrem company its 130nm manufacturing equipment from the Fab 30 in Dresden, Germany. Up to the recent past, Advanced Micro Devices produced 30 thousand of 200mm wafers per month, whereas Angstrem reportedly hopes to manufacture 12 million chips per year with at least some of them targeted at international markets, whereas the rest aimed at governmental and military needs.

“The equipment will be dismantled and delivered to the South Industrial Area of Zelenograd. Facilities in Russia will provide for making product worth up to $1 billion a year,” a highly-ranked representative of one of the parties involved in the deal told Russian business daily Kommersant.

Industry experts believe that the equipment will cost Angstrem about $250 - $300 million and sources close to the deal believe that the budget “of the whole project” may increase up to $700 million in the following years.

Currently Angstrem manufactures its products using 100mm or 150mm wafers using 0.8 micron, 1.20 micron, 1.50 micron or 2.0 micron fabrication processes. It is currently unclear whether Angstrem plans to develop its own manufacturing process or license third-party process technology.

Presently Angstrem manufactures various controllers, processors, smart cards and other microelectronics. AMD used to manufacture its AMD Athlon XP, AMD Athlon 64, AMD Opteron and AMD Sempron-series microprocessors using its 0.13 micron silicon-on-insulator process technology.

Earlier this year another Zelenograd-based company Sitronics acquired 0.18 micron production equipment from ST Microelectronics.