Irate Partners Blame AMD, Dell For Athlon Chip Shortage

Some say AMD is hurting its loyal system builders, who feel they've been dumped now that the chipmaker has a partnership with Dell and other top-tier suppliers.

Paula Rooney, Contributor

October 31, 2006

3 Min Read

System builders are irked about a severe shortage of Advanced Micro Devices Athlon 64 X2 processors and blame the chip maker's partnership with Dell.

"It's a fiasco. There's no product in the channel. It's all going to Dell," said Glen Coffield, president of CheapGuys, a system builder in Orlando, Fla. "AMD is divorcing the channel."

Coffield said AMD is hurting its loyal system builders, who feel they have been used and dumped now that the chip maker has a partnership with Dell and other top-tier OEMs.

Dell formerly was an Intel-only system maker. But after Dell and AMD inked a deal, the Round Rock, Texas-based computer giant unveiled its first AMD-based PCs in September and first AMD-based servers in October. System builders said the timing makes the problem clear.

"I'm being treated like the red-headed stepchild. Intel was always a company for the big guys, and AMD was always a company for the small guys like us," Coffield added. "The channel made AMD. Now they're at the dance with Dell, and they've thrown us to the wolves."

Another large system builder that has a relationship with AMD agreed that the situation is dire for channel partners. He said the supply problem started at the end of June and is hurting his business. "There's nothing out there. They're screwing the channel. All the stuff is going to HP and Dell, and the only inventory available to us is old legacy stuff, single-core and low-power stuff no one is buying. There's little doubt in my mind that it's because of Dell and HP," said the system builder, who asked not to be named.

"It's hard enough to be in this business and get a sale, and it really hurts when you get a sale and don't have supply," the system builder added, noting that he's worried the top-tier OEMs will poach his customers if supply in the channel doesn't improve. "It hurts sales and prevents us from competing. It makes a buyer hesitant to buy from us. If we can't provide product, they go back to OEMs."

During AMD's recent earnings call, CEO Hector Ruiz said overwhelming demand for the Sunnyvale, Calif., company's laptop processors had it "scrambling" to meet demand.

In a statement, AMD acknowledged a shortage but insisted that it's not tied to Dell's demand on its supply. "The competitive performance and advantages of AMD's current product offerings, combined with our widening relationships with system builders and regional and global OEMs, have hampered our ability to fully meet the demand of some system builder customers," the statement said. "The situation is slowly but steadily improving, and we continue of course to work every avenue to meet the needs of our customers."

One Intel partner said it's a double whammy for system builders.

"It's killing margin," said Richard Stafford, senior marketing manager at WinTec Industries, Fremont, Calif. "Normally, you wouldn't expect both a supply constraint and a price decrease, but Dell is driving down the prices in the channel because of their price competitiveness."

Some industry observers wondered if the shortage stems from AMD's switch to 65-nanometer manufacturing. Yet one East Coast system builder, who declined to be named, said that story doesn't sell to the channel.

"They are switching Sempron production to Athlon production beause the price point is so close,' said the system builder. "AMD says it is not due to Dell, but I don't believe it. Dell bought $1 million worth of inventory, so that hurt the channel."

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