AMD 1996 Annual Report Download - page 233

MARKETS
The markets for the Company's products are characterized by rapid technological
developments, evolving industry standards, changes in customer requirements,
frequent new product introductions and enhancements, and short product life
cycles. The market for microprocessors is primarily dependent upon the market
for PCs, and the market for Flash memory devices is primarily dependent upon the
market for communications devices. From time to time, the PC industry has
experienced significant downturns, often in connection with, or in anticipation
of, declines in general economic conditions. These downturns have been
characterized by diminished product demand, production overcapacity, and
resultant accelerated erosion of average selling prices. The Company's business
could be materially and adversely affected by industry-wide fluctuations in the
PC marketplace in the future.
INVENTORIES
Given the volatility of the market, the Company makes inventory provisions for
potentially excess and obsolete inventory based on backlog and forecasted
demand. However, such backlog demand is subject to revisions, cancellations, and
rescheduling. Actual demand will inevitably differ from such anticipated demand,
and such differences may have a material effect on the financial statements.
CUSTOMERS
The Company markets and sells its products primarily to a broad base of
customers comprised of distributors and OEMs of computation and communication
equipment. One of the Company's distributors, Arrow Electronics, Inc., accounted
for approximately 13 percent of 1996 net sales. No other distributor or OEM
customer accounted for 10 percent or more of net sales in 1996.
INTERNATIONAL OPERATIONS
The Company derives more than half of its revenues from international sales.
However, only a portion of the Company's international sales were denominated in
foreign currencies. Further, the Company does not have any sales denominated in
the local currencies of those countries which have highly inflationary
economies.
Nearly all product assembly and final testing of the Company's products are
performed at the Company's manufacturing facilities in Penang, Malaysia;
Bangkok, Thailand; and Singapore; or by subcontractors in Asia. Wafer
fabrication of certain products is performed at foundries in Asia. FASL wafer
fabrication facilities are located in Aizu-Wakamatsu, Japan. Foreign
manufacturing entails political and economic risks, including political
instability, expropriation, currency controls and fluctuations, changes in
freight and interest rates, and loss or modification of exemptions for taxes and
tariffs. For example, if AMD were unable to assemble and test its products
abroad, or if air transportation between the United States and the Company's
overseas facilities were disrupted, there could be a material adverse effect on
the Company's operations.
MATERIALS
Certain of the raw materials used by the Company in the manufacture of its
products are available from a limited number of suppliers. For example, several
types of the integrated circuit packages purchased by AMD, as well as by the
majority of other companies in the semiconductor industry, are principally
supplied by Japanese companies. Shortages could occur in various essential
materials due to interruption of supply or increased demand in the industry. If
AMD were unable to procure certain of such materials, it would be required to
reduce its manufacturing operations, which could have a material adverse effect
on the Company. To date, AMD has not experienced significant difficulty in
obtaining the necessary raw materials.
NOTE 7. WARRANTS
On May 24, 1995, the effective date of NexGen, Inc.'s initial public offering,
all previously issued preferred series warrants were converted into warrants to
purchase common stock. The following summarizes the warrants outstanding as of
December 29, 1996:
Warrants Warrant Price
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Warrants issued in connection with Promissory
Notes and Preferred Stock Offering, expiring
on January 17, 20000 93,280 $9.38
Warrants issued in connection with consulting
services, expiring on July 15, 1997 331,808 5.00
Warrants issued to sales agent, expiring
on August 17, 1998 14,140 6.25
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Total warrants issued and outstanding
as of December 29, 1996 439,228 $5.00 - $9.38
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Source: ADVANCED MICRO DEVIC, 10-K, March 20, 1997