AMD graphics chip shortage hitting PC vendors

An offshore Advanced Micro Devices Inc. foundry is having trouble ramping up on production of a new 40-nanometer graphics processing unit, forcing PC makers to delay shipments of desktop and laptop computers, AMD confirmed today.

The Taiwan Semiconductor Manufacturing Company Ltd. (TSMC) is struggling to get up to speed manufacturing AMD's 5800 series, 40-nm GPUs (graphics processing units), according to Jim McGregor, an analyst at In-Stat. He added that the foundry is in full production but so far yields are below expectation.

Matt Davis, a spokesman for AMD, confirmed to Computerworld that TSMC is having issues in ramping up production of the chips. He added that it's not clear how far behind the foundry is on production expectations.

"The design is sound. It's just a matter of trying to get TSMC to a point where they can yield. They're feeling the manufacturing crunch," said Davis. "We're a little bitter under yield but we're working back into a manufacturing schedule we want for these parts. TSMC can only kick them out so fast at this point."

Davis said that PC vendors are being affected but declined to say how many vendors are feeling the pinch or which ones. "It's the end of the whip," he added. "[The vendors] are going to have a hard time."

Davis also said AMD is working with TSMC on the issue and hopes to have production up to speed by year's end.

"They haven't been producing these chips for long, so you'd expect some ramp issues," said McGregor. "AMD is being affected because these are great parts and they're getting a lot of demand. They're getting a huge swing on this. When you have more demand for a product than expected and lower yields than expected, you get the perfect storm."

McGregor said AMD has a little time to get manufacturing in line before PC vendors start looking for greener pastures and turn to a graphics chip from rival Nvidia .

"It's not something you can move away from overnight," said McGregor. "They're set up for that GPU. They could switch over to Nvidia but it would take some effort. They could switch. It will all depend on how bad the shortage gets."

Dan Olds, principal analyst at Gabriel Consulting Group, said that if projections of slow tech sales, especially of high-end products, hold true, AMD should survive the production slowdown rather well. If the economy was strong, and buyers were clamoring for desktops and laptops, a production slowdown would significantly hurt the struggling AMD .

"If the problem goes on long enough, or gets worse, it may prompt system vendors to reexamine their decision or hedge with products using other suppliers," said Olds, who added that he expects AMD to rectify the problem soon. "It's not unusual to see low yields when a chip is shrunk to a smaller process. But most of these problems are ironed out well before the product is introduced into the market, which ensures that there will be enough supply to handle demand. I would expect to see yields rise over time as the glitches get fixed, but that doesn't do AMD much good right now."