Quanta sues AMD over 'defective chips'

Chipmaker AMD is being sued by Quanta, the largest contract manufacturer of laptops worldwide, after the company alleges AMD sold defective chips.

Taiwan-based Quanta Computer, the world's largest contract manufacturer of laptops, is suing chip giant AMD for breach of contract, saying the chipmaker sold defective products.

Bloomberg reports that Quanta filed suit against AMD in San Jose, California, claiming that the sold chips did not meet industry-standard heat tolerance processes.

Quanta builds laptops for Acer, Dell, HP and others, including NEC. The company builds the systems that are then rebranded and essentially made to look like another manufacturer's brand. The chips in this case were used in notebooks Quanta build for NEC, but allegedly caused the computers to fail.

AMD is the second-largest chipmaker in the world behind Intel; a $6 billion in annual revenue versus over $50 billion in annual revenue respectively.

The suit centers around the ATI RS600ME, an integrated graphics chip, according to sister site CNET. ATI was acquired by AMD in 2006.

The suit also claims breach of warranty and civil fraud.

"Quanta has suffered significant injury to prospective revenue and profits", the company said in the complaint, according to Bloomberg.

But AMD "disputes the allegations" and believes they are "without merit", the company 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".

Quanta seeks both damages and a jury trial in its filing.

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