U.S. semiconductor maker Advanced Micro Devices is set to announce it will build a new chip plant in the eastern German city of Dresden, industry sources told Reuters on Saturday. The groundbreaking ceremony for the 1.1 billion euro plant, which would be the first new major chip plant in Europe in several years, could be held as early as next week if a German parliament committee approves a loan guarantee of 336 million euros ($396 million), the sources said.

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"The only thing we need now is approval from the parliament committee on the loan guarantee," one source said. "We could have the groundbreaking for the new plant as soon as the end of next week." A European spokesman for AMD, the world's second-largest chip maker after Intel Corp, declined comment. On Wednesday industry sources said AMD had short-listed Dresden, in the German state of Saxony, as a possible location for a planned new chip plant. A spokesman for AMD in Germany confirmed the company was holding talks about a new plant, but declined to give details. The federal and state governments would jointly guarantee up to 80 percent of a 700 million euro loan package for the new plant, the industry source said. The U.S. chip maker, creating hundreds of new jobs in the Dresden region where unemployment stands at around 13 percent, could also count on grants of more than 100 million euros, the source said. AMD already employs some 2,000 people in its existing plant in Dresden, also home to an advanced memory chip factory of German chip maker Infineon Technologies. The U.S. chip maker has also considered building the new plant in East Fishkill, New York, according to industry sources.