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AMD reduces GlobalFoundries wafer order, penalized $320 million

By Shawn Knight ยท 10 replies
Dec 10, 2012
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  1. AMD's prospects just keep taking a turn for the worse as we approach 2013. The chip maker has suffered from a slow CPU market and increased pressure from rival Intel which has subsequently forced them to reduce their wafer purchase...

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  2. captainawesome

    captainawesome TS Guru Posts: 428   +44

  3. Blue Falcon

    Blue Falcon TS Addict Posts: 161   +51

    This math makes me confused. So AMD will still buy $115 million wafers and pay a $320 million penalty over time or roughly $435 million instead of buying $500 million of wafers? That sounds like only $65 million saved, but in the case of buying $500 million of wafers, they could at least sell them, even if it means lower prices. This way they are throwing $320 million at nothing.
  4. Whiskey11

    Whiskey11 TS Rookie

    AMD has been making terrible decisions ever since they got rid of Dirk Meyer. They wanted to focus on mobile devices but realised they can't do it meanwhile totally disregarded the PC market. AMD use to be an innovative company, now they are making obsolete CPUs, selling of assets and laying off people. Looking at these numbers they would have been better of just over producing the CPUs and selling $320 million worth for $65+ million, hence making a lesser loss and at the same time regaining some market share.
  5. dividebyzero

    dividebyzero trainee n00b Posts: 4,840   +1,268

    Makes fiscal sense to me.
    1.AMD are already carrying more than enough inventory, why add more processors only to have to write down (again) their value sometime in the next couple of quarters
    2.AMD's own guidance for Q4 2012 is lowered revenue in the face of Intel's continued dominance (pretty much borne out by semiconductor sales this year), so excess production will end up as inventory
    3.Ending the present wafer agreement with Glofo, frees up the opportunity for AMD to court TSMC. If nothing else, having the option of more than one foundry gives AMD price negotiating leverage.

    At this point in time, AMD have little option but to look for expenditure reductions at every turn. If they need to sell their real estate and restructure debt, they really don't have much in the way of options
    hammer2085 likes this.
  6. Blue Falcon

    Blue Falcon TS Addict Posts: 161   +51

    I don't think you understood what I am saying. Even if you buy $320 million of wafers and sell them for 75% of the original MSRP price, that's still more profits than taking a $320 million loss straight up. The reason they have inventory built-up is due to lower demand. So drop prices then and see those CPUs selling better. Drop A10-5800K from $125 to $99, FX8320 from $169 to $129. I am sure they'll sell way more.
  7. cliffordcooley

    cliffordcooley TS Guardian Fighter Posts: 11,584   +5,140

    Thats assuming there is a market for those wafers. Who would they sell to that is not already under a contract, for the wafers they need.
  8. dividebyzero

    dividebyzero trainee n00b Posts: 4,840   +1,268

    A10-5800K from $125 to $99, means
    A10-5600K from $110 to ?
    A10-5400K from $75 to ?
    A4-5300 from $65 to ?
    Using your rationale, AMD would be destroying their margins through the whole product stack, and the miracle of AMD actually selling these processors is made even more unlikely since this tranche of APU/CPU's wouldn't hit the channel until Q1 2013...just in time to be Osborned by talk of Richmond, thus duplicating Llano's unsellable parts leading up to Trinity's launch.
    So either write off now of write off in a quarter or two and add in die fusing/binning and packaging (both for the die itself and the physical SKU packaging), shipping and warehousing costs.
    captainawesome likes this.
  9. captainawesome

    captainawesome TS Guru Posts: 428   +44

    dividebyzero I was on the same path of under-understanding until you schooled me, in fact, I wanted to ask the exact same question as Falcon over there. I guess there is SOME reason Rory is CEO.
  10. lipe123

    lipe123 TS Evangelist Posts: 810   +351

    Also they are not losing the 320mil all at once, where if they went through with the orig deal they would have had to pay the full 500mil for services/products.

    It's no different that taking a loan out to pay something off over time, with a mere 115mil down they get out of the 500mil contract and pay the 320 mil off over 4 smaller payments that they can hopefully cover with selling the existing stock.

    Still the bottom line is AMD is not doing anywhere near as well as intel and its pretty sad that they are in this slump.
  11. Cota

    Cota TS Enthusiast Posts: 512   +8

    Its sad watching AMD fail in all sides, and yet managing to screw it in other ways.

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