Industry News Desk
AMD Cuts Its Chip Orders
It has also started using Taiwan Semiconductor Manufacturing Company for some advanced chips
By: Maureen O'Gara
Dec. 17, 2012 07:15 AM
What with PC demand eroding, AMD is following Intel in cutting back on chips.
It's going to have to pay Globalfoundries, its manufacturer since it sold it its plants, $320 million not to make too many processors.
AMD has also started using Taiwan Semiconductor Manufacturing Company for some advanced chips.
It was supposed to buy about $500 million worth of wafers from Globalfoundries in the fourth quarter for a total of $1.5 billion in purchases this year.
Now it finds it may only need $115 million of the stuff in Q4 and has agreed to take $1.15 billion worth next year as well as $250 million in wafers in 1Q14.
AMD has operated under a fixed-supply contract that requires it to make set payments to its supplier.
Given AMD's cash crunch, the termination fee paid to Globalfoundries will be spread over several quarters: $80 million by December 28, $40 million by April 1, and a $200 million promissory note due December 31, 2013.
AMD could save at least $65 million this way and may stint on underwriting Globalfoundries' R&D.
AMD lost $157 million in Q3 on revenues that dropped 25% year-over-year.
It also says it's going to sell and lease back its facilities in Austin, Texas in hopes of raising another $150 million-$200 million.
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