Dresden
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U.S. Chip Maker Finds Home in a German 'Silicon Valley'
BERT ROUGHTON JR.
c.1999 Cox News Service
DRESDEN On a plain a few miles north of this old and storied city, the futures of two unlikely partners are joined in an ambitious and expensive gamble.
Rising from transformed farmland is an expansive new factory with a simple contemporary design that would fit in nicely at any American industrial park.
Known as Fab 30, the plant was built by Advanced Micro Devices Inc. (AMD) for about $1.9 billion and bears a distinct resemblance to its Austin, Texas sister, Fab 25.
If all goes as planned, Fab 30 by the end of the year will begin yielding its primary and perhaps only product: the cutting edge, copper-based Athlon microprocessor chip, formerly known as K-7.
Athlon is AMD's rock in the sling for its challenge of Austin-based Intel Corp., the Goliath of chip makers.
As important as Athlon's success is to California-based AMD, it means as much or more to government and business leaders in this region as they strive to find a future after spending 50 of its last 60 years ruled by either the Nazis or Communists.
Soon after the fall of the Berlin wall, Dresden, which was left in ruins after World War II, began to aggressively pursue high-tech companies such as AMD to build what leaders here like to call the ''Silicon Valley of Saxony.''
To entice AMD, the state of Saxony offered about $500 million an offering AMD executives agree was essential to their decision to locate in Dresden.
Additionally, the city of Dresden assembled the 110-acre parcel near the city's international airport and provided infrastructure including a direct link to the Autobahn that connects Dresden to Berlin and Leipzig. The city sold the land to the company.
''We helped AMD do everything,'' said Helmut Ennen, the state official who in 1993 approached the company's chief executive Jerry Sanders about coming to Dresden. ''But the decision was theirs.''
Landing AMD was a stunning victory for Dresden, keeping the momentum going and contributing to the critical mass needed to attract other companies.
''About 5,000 people are directly employed in the high-tech businesses here, and we estimate that that produces jobs for another 15,000 people,'' Ennen said. ''This has been very important and gratifying for us.''
AMD intends to hire 1,800 people, about half of whom already work at Fab 30. All but about 30 are expected to be German, mostly from Saxony.
AMD was the second large technology firm to select Dresden, following Siemens now Infineon Technolgies by a year. Last year, the company announced a joint venture with Motorola to build a plant in Dresden.
In April Mattson Technology, a fast-growing California firm, chose Dresden as its research and development hub for Europe. In all, 420 technology companies and 2,000 suppliers have set up in and around the city.
Thus far, AMD has been impressed by its experience here, said Gary Heerssen, group vice president of AMD's Wafer Fab Group.
''If this is an experiment then you would have to label it a successful experiment to date,'' Heerssen said during an interview with Cox Newspapers in a sparsely outfitted office at Fab 30.
Heerssen is minding the store until James Doran, Fab 30's new general manager, arrives later this year. Doran, who managed Austin's Fab 25, replaced Jack Saltich, who resigned in July to work for another company.
Heerssen said he has been impressed by the early tests of Fab 30's precision equipment some of its components are so new that they are in use for the first time. On July 7, the Fab 30 plant successfully created its first copper-based chips, the first to be produced in Europe.
''It's too early to tell, but so far I think the indications are quite good'' he said.
In addition to the $500 million gift from the state, AMD was attracted to Saxony because of its supply of well-educated and under-employed workers. About a quarter of AMD's new hires here were unemployed.
Even though labor costs are higher than in Austin, the quality of the workers make up the difference, Heerssen said. ''In general, the overall educational level here on the part of the employee base is higher than it is in central Texas, and probably everywhere else,'' he said.
Additionally, it has proved to be an unusually flexible workforce for Europe, where governments tend to limit the hours people can be on the job. At AMD, many employees work 12-hour shifts and the plant is staffed 24 hours a day unheard of elsewhere in Europe.
The company and local officials speculate that this could be explained by Saxony's being fairly new to the free-market system. This means that structures such as trade unions and bureaucracies that are prevalent in much of Europe have not yet taken hold in this somewhat isolated region. Union membership in the former East Germany has fallen by 50 percent since 1991, and only about 25 percent of workers in the region are under collective-bargaining agreements.
Also remarkable for Europe, local politicians have shown little fondness for red tape that has stymied investment in other eastern regions, such as Berlin. ''We haven't lost one day of this project to bureaucratic obstructions,'' said Jens Drews, AMD's spokesman in Dresden.
Additionally, local officials two years ago came up with about $1.5 million to establish an English-speaking international school for the ''chip kids'' who came with AMD's 30 American employees. The school has grown with the demand from other expatriate families.
For the Americans here, moving to Dresden has been an enriching experience. Michael Ashley, a Californian who also maintains an office in Austin, said he tries to visit one country a month. ''It's been a great experience for me,'' he said, noting that his first visit to Europe was a house-hunting expedition to Dresden.
The Germans at the Fab, many of whom have been to Texas for training, have been exposed to a strange new culture. They address fellow workers and superiors by their first names a rare informality in Germany and have become accustomed to casual Fridays when they wear jeans to the office. On a few desks are Texas flags and in the hallways are framed photographs of their favorite watering holes in Texas and scenes of hill country vistas.
Heerssen said the company thought briefly about expanding in Texas before deciding on Dresden.
It was clear that the company needed a second Fab, but to remain in Austin would have required the acquisition of a new site and a willingness to cope with a very tight labor market, he said.
In the end, the incentives offered in Dresden proved decisive. ''It goes back to the financial arrangement that was available here that would not have been available in Austin,'' he said. ''That was the enabling factor but not the only reason.''
As it stands, Austin is expected to continue producing aluminum-based microprocessors for the mid- and low-end of the market where the volumes are higher while Dresden will produce the high-performance products.
If the Dresden experiment continues to be successful and business is good, AMD is prepared to expand here.
''The site is actually large enough for two, maybe three fabs,'' Heerssen said. ''But we have not made any plans at this point hard plans to expand beyond the existing facility.''
For Dresden leaders, who are hot after other prospects, the AMD experiment confirmed their belief in a way of thinking that runs deeper in the city than its calamitous 20th Century experiences.
About 300 years ago, Augustus the Strong perhaps the greatest Saxon King explained his theory of public finance to his fellow king, Friedrich of Prussia.
''When your majesty receives a ducat, you place it in your coffers,'' Augustus explained. ''Myself, however, I spend it so it can return to me three times over.''
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