Local tech sector shocked by surprise Quanta law suit against chipmaker AMD over 'faulty chips'

Quanta, the world's largest contract manufacturer of notebook computers claimed that AMD and its subsidiary ATI Technologies Inc. sold defective microchips that did not meet the required heat tolerance and were unfit for certain purposes, the reports said.

But AMD, the world's second largest maker of computer processors, behind Intel, has disputed the allegations, saying they are “without merit.”

The lawsuit shocked the local technology sector as it was rare, if not unheard of, for a contract electronics manufacturer to sue a largechipmaker.

According to a Bloomberg report, Quanta filed the lawsuit against AMD in San Jose, California Jan. 3, claiming that the AMD microchips sold to it did not meet industry standard heat tolerance processes.

The allegedly faulty chips were used in laptops Quanta made for NEC Corp. of Japan and caused the computers to malfunction, according to the filing.

“Quanta has suffered significant injury to prospective revenue and profits,” the company said in the complaint.

The Bloomberg report said Quanta also claims breach of warranty, negligent misrepresentation, civil fraud and interference with a contract.

AMD spokesman Michael Silverman said in an emailed message that thecompany disputes the allegations in Quanta's complaint.

“AMD is aware of no other customer reports of the alleged issues with the AMD chip that Quanta used, which AMD no longer sells,” Silverman said.

“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.”

Quanta, which also makes laptops for many noted computer vendors, including Hewlett-Packard Co., Dell Inc. and Acer Inc., confirmedThursday that it has sued AMD's graphics processing units and chipsets maker ATI over defective products.

The company, however, would not go into details, saying it is inappropriate to make any comments now that the case is being processed.

The case came as a big surprise to local technology sector. Industry executives said they have never before seen any contract computer maker sue chipset suppliers.

Analysts said brand name laptop vendors, contract makers and chip makers are closely tied together. There are only two CPU suppliers in the PC sector — Intel and AMD while graphics processing chip business are dominated by nVidia and ATI. After AMD acquired ATI, contract makers have been in an even weaker position in negotiations. Few of them have tried to sue chip suppliers, industry sources said.

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