The chip maker now expects revenue for the quarter ending Sept. 29 to be down about 10 percent from the second quarter. In a previous forecast, AMD said revenue would decline by no more than 4 percent, and might even increase slightly.

AMD said it was also affected by lower selling prices for its chips and poor utilization of its manufacturing facilities. It will take a US$100 million inventory charge for unsold products.

The write-off could be tied to its "Llano" Fusion chips, which started appearing in PCs in the middle of last year, said Nathan Brookwood, principal analyst at Insight 64.

AMD had supply and manufacturing issues with Llano and demand for the chip was poor. The company is doing better with a successor to Llano code-named Trinity, which became available in laptops and PCs in May.

AMD designs PC, server and graphics processors that are then manufactured by contract firms such as GlobalFoundries. Demand for PCs has been slumping, with IDC and Gartner reporting PC shipments in the third quarter dropping by 8.5 percent from a year earlier.