AMD 1997 Annual Report Download - page 30

Flash memory products should significantly deteriorate. This could have a
material adverse effect on the Company. In addition, any inability of the
Company to remain competitive with respect to process technology could have a
material adverse effect on the Company. For example, the Company's ability to
generate sufficient revenue to achieve profitability in the microprocessor
business in the near future and the Company's success in competing with Intel,
and producing higher performance AMD-K6 microprocessors in volumes sufficient
to increase market share depends on the timely development and qualification
of 0.25 micron process technology in Fab 25. There can be no assurance that
the Company will be able to commit Fab 25 production to a qualified 0.25
micron process technology in order to fabricate product in sufficient volume
to generate revenue necessary to offset investments in Fab 25 and meet the
anticipated needs and demands of its customers. Likewise, the Company is
making a substantial investment in Dresden Fab 30. The business plan for
Dresden Fab 30 calls for the successful development and installation of 0.18
micron process technology and copper interconnect technology in order to
manufacture the AMD-K7 microprocessor beginning in 1999. There can be no
assurance that the Company will be able to develop or obtain the leading edge
process technologies that will be required in Dresden Fab 30 to fabricate the
AMD-K7 microprocessor successfully.
Manufacturing Interruptions and Yields. Any substantial interruption with
respect to any of the Company's manufacturing operations, either as a result
of a labor dispute, equipment failure or other cause, could have a material
adverse effect on the Company. For example, the Company's recent results have
been negatively affected by disappointing AMD-K6 microprocessor yields. The
Company may in the future be materially adversely affected by fluctuations in
manufacturing yields. The manufacture of integrated circuits is a complex
process. Normal manufacturing risks include errors and interruptions in the
fabrication process and defects in raw materials, as well as other risks, all
of which can affect yields. Additional manufacturing risks incurred in ramping
up new fabrication areas and/or new manufacturing processes include errors and
interruptions in the fabrication process, equipment performance, process
controls as well as other risks, all of which can affect yields.
Product Incompatibility. While AMD submits its products to rigorous internal
and external testing, there can be no assurance that the Company's products
will be compatible with all industry-standard software and hardware. Any
inability of the Company's customers to achieve such compatibility or
compatibility with other software or hardware after the Company's products are
shipped in volume could have a material adverse effect on the Company. There
can be no assurance that AMD will be successful in correcting any such
compatibility problems that are discovered or that such corrections will be
acceptable to customers or made in a timely manner. In addition, the mere
announcement of an incompatibility problem relating to the Company's products
could have a material adverse effect on the Company.
Product Defects. One or more of the Company's products may possibly be found
to be defective after AMD has already shipped such products in volume,
requiring a product replacement, recall, or a software fix which would cure
such defect but impede performance. Product returns could impose substantial
costs on AMD and have a material adverse effect on the Company.
Essential Manufacturing Materials. Certain 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 a few foreign 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 necessary raw
materials.
International Manufacturing and Foundries. 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. AMD has a 50-year land lease in
Suzhou, China, to be used for the construction and operation of an additional
assembly and test facility. The Company also depends on foreign foundry
suppliers and joint ventures for the manufacture of a portion of its finished
silicon wafers.
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Source: ADVANCED MICRO DEVIC, 10-K405, March 03, 1998