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AMD Cuts Its Chip Orders

It has also started using Taiwan Semiconductor Manufacturing Company for some advanced chips

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.

More Stories By Maureen O'Gara

Maureen O'Gara the most read technology reporter for the past 20 years, is the Cloud Computing and Virtualization News Desk editor of SYS-CON Media. She is the publisher of famous "Billygrams" and the editor-in-chief of "Client/Server News" for more than a decade. One of the most respected technology reporters in the business, Maureen can be reached by email at maureen(at)sys-con.com or paperboy(at)g2news.com, and by phone at 516 759-7025. Twitter: @MaureenOGara

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