AMD shorts purchases, Global Foundries 'fines' AMD

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http://arstechnica.com/information-...akes-on-chip-manufacturing-as-sales-plummmet/
In a new agreement signed with manufacturing partner GlobalFoundries, AMD reduced its promised silicon wafer purchases to just $115 million, down from $500 million, while agreeing to pay a $320 million penalty for the order change over the next year. AMD spun off GlobalFoundries in 2009, and in March of 2012 it sold off its remaining stake in the company, leaving an investment arm of the government of the United Arab Emirates as the company's sole owner.
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Ouch. I guess it beats maintaining a non-moving inventory.
 
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I wonder if this is because they got a better deal somewhere else, or because they just can't afford $500 million in wafers?
 
Simmonz said:
At least with on hand inventory you can sell it for something, with a fine you get nothing out of it. Now this is without knowing how much more than the $320 million AMD would have to pay for that inventory had it been made.
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Im thinking the same thing. I would much rather have $320 million of product than to give it away for free. So they are gonna pay them $445 million. Why not go ahead and stick with the original deal?
 
BoogerBomb said:
Im thinking the same thing. I would much rather have $320 million of product than to give it away for free. So they are gonna pay them $445 million. Why not go ahead and stick with the original deal?
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Because if AMD sets a precedent for giving away their processors for almost nothing to the entire market, they will never be able to charge higher prices again. It would also force them to cut prices on Brazos, which is their big seller.

AMD is not convinced yet that things are over, so they're still playing the long game. But it's very expensive to run in reverse like this, so they'd better hope for growth (with better purchasing targets from GF) next year.
 
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