Quanta claims AMD chips were not able to meet desired heat tolerances for NEC notebooks.
The world's biggest contract manufacturer of laptops Quanta has taken legal action against AMD for an alleged breach of contract.
Quanta claimed AMD sold defective chips that could not meet required heat tolerances and were unfit for certain purposes, Bloomberg reported after viewing a court filing.
Quanta, which produces PCs for major vendors including HP and Dell, was using AMD chips to build laptops for NEC. The processors caused the machines to malfunction, according to Quanta.
AMD is aware of no other customer reports of the alleged issues with the AMD chip that Quanta used.
"Quanta has suffered significant injury to prospective revenue and profits," Quanta claimed in its filing.
AMD has disputed the allegations, however, saying it believes they are "without merit."
"AMD is aware of no other customer reports of the alleged issues with the AMD chip that Quanta used, which AMD no longer sells," AMD spokesperson Michael 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."
According to its website, Taiwanese Quanta produces one out of every three laptop PCs in the world and all the top ten PC companies in the world use the company's services in some way.
AMD had its troubles in 2011, announcing in November it was planning to cut 10 per cent of its workforce by 2012.
However, it still found time to launch some 16-core chips in the same month – more cores than any other x86 processors available today. It claimed the Opteron chips were designed for use in cloud providers' database.