AMD 2003 Annual Report Download - page 18

Table of Contents
Competition With Respect to Our Other Products
With respect to PCS products, our principal competitors are Hitachi, Intel, Motorola, Inc., NEC Corporation, Toshiba, Transmeta, and Via Technologies.
We expect competition in the market for PCS devices to increase in 2004 as our principal competitors focus more resources on developing low-power embedded
solutions.
Marketing and Sales
We market and sell our products, other than Flash memory products, under the AMD trademark. We employ a direct sales force through our principal
facilities in Sunnyvale, California, and field sales offices throughout the United States and abroad, primarily Europe and Asia Pacific. We also sell our products
through third-party distributors and independent representatives in both domestic and international markets pursuant to non-exclusive agreements. Distributors
also sell products manufactured by our competitors. In 2003, one of our distributors, Avnet, Inc., accounted for approximately 13 percent of our consolidated net
sales. Avnet primarily purchases our microprocessor products. Also in 2003, Fujitsu Limited accounted for approximately 13 percent of our consolidated net
sales. Fujitsu primarily purchases Spansion Flash memory products from FASL LLC. No distributor accounted for ten percent or more of our consolidated net
sales in 2002 and 2001. No OEM customer accounted for ten percent or more of our consolidated net sales in 2003, 2002 or 2001.
FASL LLC’s Flash memory products are marketed and sold under the Spansion trademark. We and Fujitsu act as distributors of Spansion Flash memory
products and receive a commission from FASL LLC. We distribute Spansion products in the same manner as we sell our other products, through our direct sales
force and through third-party distributors and independent representatives.
We market our products through our direct marketing and co-marketing programs. Our direct marketing activities include print and Web-based advertising
as well as consumer and trade events and other industry and consumer communications. In 2003, we primarily focused our direct marketing activities on the
launch of our AMD Opteron and AMD Athlon 64 microprocessor products and the AMD64 technology platform. In addition, we have cooperative advertising
and marketing programs with our customers, including market development programs. Under these programs, eligible customers can use market development
funds in partial reimbursement for advertisements and marketing programs related to our products.
We intend to build upon our position as a global supplier of integrated circuits by expanding our focus to include emerging global markets. In 2003, we
focused on expanding our participation in China’s microprocessor, embedded processor and Flash memory markets, and we expect to continue these efforts in
2004. For example, in order to strengthen and consolidate our efforts in China, effective in February 2004, we established a new entity, Advanced Micro Devices
(China) Co., Ltd., which will serve as our regional headquarters in the region. We also established relationships with OEMs such as Dawning Information
Industry Corp. Ltd., a server manufacturer in China. These activities expanded on our existing investments in China, including FASL LLC’s Flash memory
assembly and test facility in Suzhou.
Distributors typically maintain an inventory of our products. Generally, we sell to distributors under terms allowing the distributors certain rights of return
and price protection on any inventory of our products held by them. We defer the gross margin on these sales to distributors, resulting from both our deferral of
revenue and related product costs, until the applicable products are re-sold by the distributors. The price protection and return rights we offer to our distributors
could materially and adversely affect us if there is an unexpected significant decline in the price of our products.
In 2003, international sales as a percent of net sales were 80 percent. Our international sales operations entail political and economic risks, including
expropriation, currency controls, exchange rate fluctuations, changes in freight rates and changes in rates and exemptions for taxes and tariffs.
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Source: ADVANCED MICRO DEVIC, 10-K, March 09, 2004