Quanta Sues AMD Over "Faulty" Chips

The world's largest contract maker of notebook computers, Quanta Computer Incorporated, has filed a lawsuit against Advanced Micro Devices Incorporated (AMD) for what Quanta is calling a breach of contract. Quanta is accusing AMD of selling the company defective products and thus seeks compensation.

AMD and its ATI Technologies Incorporated unit sold chips to Quanta that did not meet the company's tolerances and were unfit for particular purposes, the company noted in a federal court filing in San Jose, California. The chips Quanta purchased were used in notebooks Quanta manufactured for NEC which caused the computers to malfunction and crash according to the court filing.

In a statement from Quanta that is found in the court documents says, "Quanta has suffered significant injury to prospective revenue and profits." Quanta is seeking a trial by jury as well as damages for the faulty chips. AMD, which accumulates over $6 billion in annual revenue, is the second largest maker of computer processors, bested only by Intel, which has a staggering $50 billion annual revenue.

The lawsuit also claims breach of warranty, negligent misrepresentation, civil fraud and interference with a contract. "AMD disputes the allegations in Quanta's complaint and believes they are without merit," AMD spokesman Michael Silverman said in a statement. "AMD is aware of no other customer reports of the alleged issues with the AMD chip that Quanta used, which AMD no longer sells. In fact, Quanta has itself acknowledged to AMD that it used the identical chip in large volumes in a different computer platform that it manufactured for NEC without such issues."

In addition to NEC, Quanta makes computers on contract for HP, Dell and Acer. The company's shares increased 1.9% in Taipei today before news of this lawsuit went public, and the case has been filed as Quanta v. Advanced Micro Devices, 12-cv-12, U.S. District Court, Northern District of California.

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Source: Bloomberg - Quanta Sues AMD Over Allegedly Unsuitable Chips for NEC Notebook Computers