Advanced Micro Devices will use Chartered Semiconductor Manufacturing's manufacturing services to produce AMD's Opteron and Athlon 64 processors starting in 2006, adding production capacity as the company starts building chips at its second Dresden, Germany, plant, the companies said Monday.

Chartered will also license AMD's Automated Precision Manufacturing (APM) technology as part of the agreement, the companies said in a news release. APM is a software tool that helps AMD manage the complicated process of building a modern semiconductor.

AMD currently owns and operates chip fabrication plants, known as "fabs" in the industry, in Dresden and Austin, Texas. Its current Dresden fab builds its Opteron and Athlon 64 processors, as well as its older Athlon XP processors. The Austin facility is mainly responsible for building flash memory chips.

A second Dresden fab has been under construction since late last year. This plant is slated for completion in 2006 and will use 300 millimeter wafers. AMD's current Dresden fab uses its 90-nanometer process technology to build chips on 200mm wafers. The larger wafers mean that more chips can be cut from each wafer, improving efficiency and lowering manufacturing costs.

The partially completed fab in Dresden will serve as the main facility for AMD's 64-bit processors, but Chartered's fabs will be available to provide "incremental capacity," said Dirk Meyer, executive vice president of AMD's Computation Products Group, in a statement.

Chartered plans to implement APM within its facilities starting with the 300mm Fab 7 in Singapore in the fourth quarter, it said. AMD uses APM to manage hundreds of expensive chip-making tools as wafers move from tool to tool throughout the manufacturing process. Sensors check for defects on the wafers and send the data to servers that analyze the data and recommend changes to the manufacturing process to correct problems.

Chartered is a foundry, like its larger competitors Taiwan Semiconductor Manufacturing Corp. (TSMC) and United Microelectronics. With the costs to construct new fabs running well into the billions of dollars, some chip companies prefer to contract with foundries like Chartered or TSMC to build their chips.