AMD’s Q3 Profit Constrained by Manufacturing Problems

Advance Micro Devices saw gains in revenue and profits in the third quarter of 2011, but those were tempered by “significant manufacturing challenges” at GlobalFoundries. The company’s results were generally positive: revenue rose to $1.69 billion, a 7 percent sequential increase and a 4 percent increase year-over-year. Net income was $97 million, with earnings per share of $0.13.

The company was particularly strong in the mobile and server spaces. Its mobile Fusion APUs saw a 60% increase in shipments, while the first deliveries of its Interlagos CPUs led to a 27% gain in server revenue sequentially. The mobile segment was strong thanks to increased sales in emerging markets like India and China, which saw a 23% growth in quarterly CPU revenues.

“Strong adoption of AMD APUs drove a 35 percent sequential revenue increase in our mobile business,” elaborated Rory Read, AMD’s new President and CEO.

That success is part of the problem. Yield, ramp, and other 32 nm manufacturing issues at GlobalFoundries’ Fab 1 in Dresden limited supply of “Llano” Fusion APUs, Bulldozer-based FX CPUs, and Interlagos server CPUs.

The company has been divesting its ownership of GloFo, its former manufacturing arm. It now holds 9.6% of its primary manufacturing partner, with the majority controlled by the Advanced Technology Investment Company (ATIC), wholly owned by the Emirate of Abu Dhabi.

Supply of 45nm product was also less than expected, due to unforeseen complexities related to the use of common tools across both technology nodes. Read admitted that he was “disappointed with yields” so far, but said that both companies were working closely together to overcome those problems.

“Despite supply constraints, we saw double-digit revenue and unit shipment growth in emerging markets like China and India as well as overall notebook share gains in retail at mainstream price points. Through disciplined execution and continued innovation we will look to accelerate our growth and refine our focus on lower power, emerging markets, and the cloud,” he stated.

AMD spent $361 million on research and development during Q3, and also saw strong graphics revenue of $403 million thanks to robust back-to-school upgrades. It should see a boost this quarter, thanks to the launch of its next-generation of GPUs using 28nm technology.