 AMD has announced that it is reducing its capital expenditure plans for 2007 by $500 million. Initially, AMD planned to spend $2.0 billion this year on adding capacity at Fab 36 and initial production ramp of its converted facility Fab 30 to 300mm wafer production. AMD had also built and is tool installing at a ball bumping facility adjacent to Fab 30.
The company also stated that it would be restructuring the business in an effort to reduce operating costs and a virtual hold on discretionary expenses and hiring. AMD said that the reduction in capital spending would not ‘materially impact capacity plans for the year,' possibly indicating a greater reliance on foundry partner, Chartered Semiconductor in the second half of the year, or that sufficient installed capacity is already in place for expected market demand. However, no explanation was given on this statement by the company. The cuts and restructuring have been attributed to a significant drop in revenues due to pricing and competitive pressure from Intel Corp as well as ‘significantly lower unit sales, especially in the resale channel,' historically a strong market for the company. In the previous quarter, AMD had projected that revenues would be in the range of $1.6 to $1.7 billion for the first quarter of 2007. However in a second warning since then AMD now expects revenues to be significantly below previous guidance, now at approximately $1.225 billion, which is expected to produce significant losses for the quarter.
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