AMD 1996 Annual Report Download - page 13

and manufacture of core logic chip sets, motherboards, BIOS software and other
components. In recent years, these third-party designers and manufacturers
have lost market share to Intel. To compete with Intel in this market in the
future, the Company intends to continue to form closer relationships with
third-party designers and manufacturers of core logic chip sets, motherboards,
BIOS software and other components. The Company similarly intends to continue
to expand its chip set and system design capabilities, and offer to OEMs a
portion of the Company's processors together with chip sets and licensed
system designs incorporating the Company's processors and companion products.
There can be no assurance, however, that such efforts by the Company will be
successful.
VANTIS
Vantis products ($248 million, or 13%, of the Company's 1996 net sales) are
high speed programmable logic devices which are used in a wide range of
electronic systems. Programmable logic devices are standard logic products
produced in a "blank" state that can be custom configured into specific logic
circuits by programming the devices with electrical signals.
The Company offers a full range of simple programmable logic devices and
complex programmable logic devices, but does not participate in the market for
field programmable gate arrays. Programmable logic devices are used in
telecommunications equipment, network infrastructures, hard disk drives,
printers, industrial machine control and numerous other types of electronic
equipment by third-party OEMs which seek to optimize the performance of their
products by custom configuring the logic IC while minimizing time to market
through the use of a standard logic product. The Company's programmable logic
devices are sold to a broad range of manufacturers of electronics systems.
Customers utilizing programmable logic devices must use special software
packages, generally provided by the suppliers of the programmable logic
devices, to program the programmable logic devices. AMD provides its
programmable logic device customers with software which it licenses from third
parties and is dependent upon third parties for the software and continuing
improvements in the software. An inability of AMD to continue to obtain
appropriate software and improvements from third parties, to license
alternative software from another third party, or to develop its own software
internally could materially adversely affect the Company's Vantis business,
including the timing of new or improved product introductions, which could
have a material adverse effect on the Company.
The Company is in the process of transferring its operations relating to the
design, development and marketing of programmable logic devices to a wholly
owned subsidiary, Vantis Corporation, dedicated solely to programmable logic
devices. Vantis Corporation will rely upon the Company for manufacturing
services. A dedicated programmable logic device sales force was formed from
members of the Company's existing sales force and began operating as a
separate unit in the second half of 1996.
RESEARCH AND DEVELOPMENT; MANUFACTURING TECHNOLOGY
The Company's expenses for research and development in 1994, 1995 and 1996,
were $295 million, $417 million and $401 million, respectively. Such expenses
represented 14%, 17% and 21% of net sales in 1994, 1995 and 1996,
respectively. The Company's research and development expenses are charged to
operations as incurred. Most of the Company's research and development
personnel are integrated into the engineering staff.
Manufacturing technology is the key determinant in the improvement in
semiconductor products. Each new generation of process technology has resulted
in products with higher speed and greater performance produced at lower cost.
AMD continues to make significant infrastructure investments to enable the
Company to continue to achieve high volume, high reliability and low cost
production using leading edge process technology.
The Company's efforts concerning process technologies are focused in three
major areas: non-volatile memory technology used by Flash memory and EPROM
products; logic technology used by the Company's microprocessors, embedded
processors, I/O, networking and communications products; and programmable
logic
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Source: ADVANCED MICRO DEVIC, 10-K, March 20, 1997