New York/Dresden, Germany  - US chipmaker AMD plans to restructure its German-based manufacturing operation in Dresden in a bid to cut costs, the company said Tuesday.

The loss-making company said it plans to form a new joint venture, which will receive up to 6 billion dollars in funding from an investment company in Abu Dhabi.

The funds will enable AMD to expand its Dresden operation and build a state-of-the art plant in the United States in a bid to make it more competitive against market leader Intel.

The Dresden operation will fall under the wing of a new venture called Foundry Co, in which Advanced Technology Investment Co (ATIC), an Abu Dhabi-based firm, will hold 55.6 per cent.

AMD, which has suffered recently due to product delays and losses, will hold the rest. The new operation aims to trim costs by producing chips for other companies.

Hans Deppe, the head of AMD's Dresden operation, said production there would increase in the first half of 2009. Around 2,800 workers are employed in the company's two plans in the city.

AMD shares rose more than 25 per cent on the news to 5.35 dollars ahead of the start of regular trading in New York.

The company, which lost more than 2 billion dollars in the second quarter of 2008, had been looking for a fresh injection of capital and had been considering outsourcing its chip-making plants.

Analysts said AMD needed to modernize its Dresden operations in order to compete with Intel, which holds a major share of the market.

ATIC will invest 2.1 billion dollars to purchase its stake in Foundry Co, of which 1.4 billion will be made directly in the new entity and the remainder paid to AMD to purchase additional shares in the company.

The new company will also assume 1.2 billion dollars of AMD's existing debt. ATIC has committed additional equity funding to Foundry Co of a minimum of 3.6 billion dollars and up to 6 billion dollars over the next five years.

"Today is a landmark day for AMD, creating a financially stronger company with a tightened focus," said Dirk Meyer, president and chief executive officer of AMD. (dpa)