'Scary amount of x86 capacity' signals escalation in chip price war.

Intel plans to open a fourth 45nm production facility by converting its Rio Rancho site in New Mexico. 

The conversion is expected to cost between US$1bn and US$1.5bn, and work will start in the second half of 2008. The facility currently manufactures 90nm chips.

Intel's first 45nm chips are currently under development in Hillsboro, Oregon and the first examples are scheduled to arrive later this year.

A new plant in Chandler, Arizona is scheduled to start production late this year, followed by a new fab under construction in Kiryat, Israel by the first half of 2008. Both facilities require an investment of about US$3bn.

Jim McGregor, a research director at analyst firm In-Stat, said that the Intel announcement is no surprise.

Intel typically has three production facilities live within a short period of time after introducing a new production technology, followed by a fourth at a later stage.

AMD has stated that it will start shipping its first 45nm chips by 2008. The firm is expected to have two 45nm production facilities live by the end of this year, and will outsource some chip manufacturing to Chartered Semiconductor. 

"That is a scary amount of capacity for the x86 market," McGregor told vnunet.com.

The analyst also predicted that Intel and AMD will continue the price war that started last April.

Facing declining market share in the x86 market, Intel cut the prices of its processors in April.

While the move helped the chipmaker to stabilise its market share, Intel has put pressure on profit margins for both itself and AMD.

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