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AMD cuts wafer orders

by on07 December 2012 2478 times
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AMD, in the last quarter of this year significantly reduced wafer orders from GlobalFoundries. According to the original agreement, AMD was supposed to but $500 Million worth of wafers from GlobalFoundries, but that figure is now down to about $ 115 million. AMD CEO Rory Read tried to cool the situation by saying “Today's announcement demonstrates that the long-term strategic partnership between AMD and GlobalFoundries continues to benefit both companies,” but it's obvious that this was something that AMD certainly did not want.

The reason for the reduction in orders is weak demand for chips in the global market [in particular AMD’s CPUs – Ed], but also AMD's strategy of saving and cost-cutting. However, because of the termination of the original contract AMD has to pay some penalties to GlobalFoundries, totaling $320 million by the end of next year, of which $80 million must arrive as early as this quarter.

AMD is expected to return to positive revenue in the second half of next year and is currently working on ensuring liquidity and money management at least according to AMD's CFO Devinder Kumar. This is not the only bad news for AMD, their stocks are hovering around $2.35 which is well below the 52 week closing high of $8.25 which it hit in March. This is still better than it was in the week after Thanksgiving ($1.88). Even though this is pretty big blow for AMD they already made a new agreement with GlobalFoundries worth $250 million in wafers for the first quarter of the next year.

[Ed – AMD has a few hurdles to get over in the next year. Right now they have made this choice so that they are not stuck with stock that they cannot sell. Even with the fine AMD is saving $65 million over what they were going to have to shell out if they could sell every CPU they stamped out. It was a hard choice for AMD to make, but they have to cut costs and corners while they work to establish a foothold in the consumer’s wallet. For now we can expect them to continue to concentrate on GPUs, APUs and Server CPUs, but expect to see their desktop line cut back some. Doing this will let them invest the most in R&D (especially with the extra funding they just received) while still maintaining a revenue stream. We will try to get some more information about AMD’s plans in the coming weeks.]

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Last modified on 07 December 2012
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