AMD drastically cuts its chip orders as its PC sales decline

AMD isn't doing so well financially, and it doesn't look like things are going to get better anytime soon as the processor maker has announced it would cut its chip wafer purchases from Globalfoundries by nearly 75 percent for the fourth quarter of 2012.

Bloomberg reports that while AMD previously planned to pay Globalfoundries $500 million for its wafers, it will end up buying just $115 million of the chips. This is just the latest piece of bad news from AMD. In October it announced that it would cut 15 percent of its workforce by the end of the year.

The new and reduced chip agreement with Globalfoundries means that AMD must also pay an additional $320 million termination fee, which must be paid to Globalfoundries by the end of 2013. AMD has been losing money for the past few quarters but claims that it will "return to free cash flow generation in the second half of 2013."

This news comes after the NPD Group claimed total sales of Windows PCs went down 21 percent in the first four weeks since the launch of Windows 8. PC makers such as Dell, Toshiba and Sony have all said that sales of Windows 8 PCs were about as they expected, although there does appear to be a supply issue with touch screen notebooks, tablets and convertibles. AMD chips haven't been featured in many major Windows 8 releases from leading computer manufacturers.

Source: Bloomberg | Image via AMD

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21 Comments

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Oh John.

Next time please explain thurly why this is happening so people don't start to speculate on things.

This is not bad news for AMD, it's good news. AMD had alot of inentory to write of last quarter because they couldn't sell it. The fine they have to pay GloFo is one time off and that's that. Now AMD has a deal with GloFo for quarterly wafers instead of yearly which will "drasticly" cut the writeoff's. So instead of AMD buying in chips they can't sell they are just buying in as much as they think they could sell at this time on the market and even if they feel they will be short on chips they'll just give in another order. AMD is saving money on this deal, this has nothing to do with Intel nor anyone else.

alwaysonacoffebreak said,
Oh John.

Next time please explain thurly why this is happening so people don't start to speculate on things.

This is not bad news for AMD, it's good news. AMD had alot of inentory to write of last quarter because they couldn't sell it. The fine they have to pay GloFo is one time off and that's that. Now AMD has a deal with GloFo for quarterly wafers instead of yearly which will "drasticly" cut the writeoff's. So instead of AMD buying in chips they can't sell they are just buying in as much as they think they could sell at this time on the market and even if they feel they will be short on chips they'll just give in another order. AMD is saving money on this deal, this has nothing to do with Intel nor anyone else.

"inentory to write of" ?
am i missing something here ?
Do CPU wafers have a certain shelf life before they decay and are no longer usable ?

I dont know what the fuss is all about.. actually when we talk about i5's by intel.. a FX 8350 is as good as a i5 3570k i believe and the same price right? also AMD mobo's are kinda cheap.. i mean i could get a Asus Crosshair V Formula for about the same price i would get a Asus Maximus Gene.. so same performance but AMD is cheaper, now this not might be the same with all processors! but most of the gamers or people whoo buys a new processor actually atleast buys a quad core. so the quad core fraction of there sale should be good enough i guess.. but its not, Because there failing to market there products.. and i completely disagree with all the biased reviewers out there.. comparing a 8350 to a 3770k when they are not even in the same price bracket.

so everything just comes down to bad marketing by them and its not like there processors suck or anything.

Having no competition in the market would be awful for consumers, I especially hope that AMD don't take ATI with them if they do go under.

Javik said,
Having no competition in the market would be awful for consumers, I especially hope that AMD don't take ATI with them if they do go under.

Radeon aside, because I still think they're great. Their CPUs haven't been putting up much of a fight in the power efficiency market for awhile now. While some AMD chips can match an Intel, they do so with much more power...and these days, power efficiency is where it's at for a lot of people (laptops, tablets, etc)

intel is kicking their ass now. everything is focused on these low power chips,and everything windows 8 seems made for these specifically. looks like AMD was caught with their pants down.

Come on AMD, get your act together, don't make me and others like me lose faith in you.
And if they have to pay an aditional $320m, why not just have placed a larger order to offset the termination fee?

Edit, I just noticed n_K,'s comment...

Lol what, so instead of paying $500m they're now paying $115m and a $320m termination fee = $435m, so for saving $65m they're getting a fifth of what they originally wanted, what dumb ****** agreed to do this ?


n_K said,
Lol what, so instead of paying $500m they're now paying $115m and a $320m termination fee = $435m, so for saving $65m they're getting a fifth of what they originally wanted, what dumb ****** agreed to do this ?

its like when you lease a property for a year,and after 3 months you don't need the property anymore, you must break the lease and pay the remainder. it doesn't sound dumb anymore does it?

n_K said,
Lol what, so instead of paying $500m they're now paying $115m and a $320m termination fee = $435m, so for saving $65m they're getting a fifth of what they originally wanted, what dumb ****** agreed to do this ?

Agreed - if they kept the original order and flooded the market with 1/3rd price CPU's they'd still be ahead!

Beancounters - no idea!

n_K said,
Lol what, so instead of paying $500m they're now paying $115m and a $320m termination fee = $435m, so for saving $65m they're getting a fifth of what they originally wanted, what dumb ****** agreed to do this ?

That's exactly what I was thinking. Unless I'm missing something, that's just ridiculously stupid.

I assume it's due to when the money must be paid ($500M is 2012, or $115M in 2012 and the termination fee by the end of 2013), giving them more time.

n_K said,
Lol what, so instead of paying $500m they're now paying $115m and a $320m termination fee = $435m, so for saving $65m they're getting a fifth of what they originally wanted, what dumb ****** agreed to do this ?

yup !

and why not take the wafers and use them later ?
obviously i know little about it all i don't work there or anything
but that part of the story just does not seem very logical to me at all..

Hopefully they will be Z, C and E chips with a few A's on the side. The FX chips, while bring home the bacon, don't do it enough for AMD to make serious money from them. Just hope its enough to keep them going till 2014 and their long term fusion plan bares fruit with HSA.

Don't count AMD out just yet, they have been on the "way out" for years since Intel hammered them with Core, yet they refuse to die.

Omen1393 said,
I think it's important to note that there are no AMD based Windows 8 tablets/convertibles available.

I think there will be but it's really up to the OEMa. No reason you can't use AMDs new APUs for a tablet instead of Intels atom.

Omen1393 said,
I think it's important to note that there are no AMD based Windows 8 tablets/convertibles available.

In the six weeks since Windows 8's launch, only 1% of Windows 8 devices have been tablets and only 6% have been touchscreen PCs. There's only so much of an affect being absent in the touch device segment can be.

Ouch, this sucks. I'm no AMD CPU fan but we need them around to say the least. I'll still buy a new Radeon video card though.