AMD Fires 12%: What Went Wrong

Advanced Micro Devices, Inc. (AMD) announced plans to lay off 1,400 workers to cut costs.

Aside from firing at least 10% of the firm's global workforce, the company announced that they will momentarily halt existing contractual commitments. Shipments for their cutting-edge chips dubbed as accelerated processing units were also postponed as part of the company's over-all plan to cut costs. These chips are considered to have a vital role in offering high-end graphics and general processing capabilities that the company could use for its future plans.

AMD experienced a recent difficulty when its manufacturing partner, GlobalFoundries, had manufacturing problems in the process of devising a new kind of chip for AMD. This led to the decline of AMD Fusion ships supply which created a big impact for the firm's third-quarter revenue. The Microprocessor Company was also hit hard by an industry-wide problem. This problem is due to the decline in PC sales (especially in U.S. and Europe) because of the economic problem as well as the tough competition from smartphones and tablets. AMD provides chips for PCs which means that the firm does not have a valuable contribution to the growing smartphone and tablet market. Research firms IDC and Gartner Inc. also revealed even though PC shipments are growing, the growth rate is at a considerable slow pace.

This is not the first time that AMD decided to let go of workers due to financial struggles because back in the year 2008-2009, a total of 3,300 workers were let about by the company. Rory Read, the new CEO of AMD who was recently hired from Lenovo Group last August considered this action plan as part of AMD's strategy to penetrate the new computing markets that are dominant in present times. He also explained in his statement the reason why this kind of action is needed stating that reducing costs and focusing its workforce on key opportunities will boost AMD's competitiveness.

The cutting of workers for AMD is expected to help the company in saving up an estimated amount of US$200 million for the year 2012. As part of their strategic plan, AMD will undergo restructuring but the process involving a restructure would also mean high expenses. The company estimates that about US$101 million would be spent for restructuring expenses while US$4 million will be for the company's expenses.