AMD 2003 Annual Report Download - page 25

Table of Contents
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the consolidated financial statements and related notes as of December 28, 2003 and
December 29, 2002, and for each of the three years in the period ended December 28, 2003, which are included in this annual report. Certain prior period
amounts have been reclassified to conform to the current period presentation.
Overview
We design, manufacture and market industry-standard digital integrated circuits that are used in diverse product applications such as desktop and mobile
PCs, workstations and servers, communications equipment, and automotive and consumer electronics. Our products include microprocessors, Flash memory
devices, and Personal Connectivity Solutions products.
The semiconductor industry has recently shown signs of recovery from the downturn experienced during 2001 and 2002, which contributed to an
improvement in our operating results during 2003 compared to 2002. Total net sales for 2003 of $3,519 million increased 30 percent compared with net sales of
$2,697 million for 2002. This increase was driven primarily by increased sales of microprocessors and Flash memory products across all geographies as well as
the consolidation of FASL LLC’s results of operations, which include sales by FASL LLC to Fujitsu. In addition, the restructuring and cost-cutting measures that
we initiated in 2002 contributed to significant cost savings in 2003. These cost savings, combined with the increase in revenues, contributed to a 79 percent
decrease in net loss from a net loss of $1,303 million in 2002 to a net loss of $274 million in 2003.
During 2003, we reached an agreement with Fujitsu to form FASL LLC. The formation of FASL LLC has allowed us to combine our and Fujitsu’s product
manufacturing and technology development efforts to respond more quickly to the demands of our Flash memory product customers. As a result of the
transaction, we began consolidating FASL LLC’s results of operations on June 30, 2003. However, as FASL LLC did not exist prior to June 30, 2003, the results
of operations for prior periods did not include the consolidation of FASL LLC’s operations. Accordingly, the segment operating information for our Memory
Products segment for the year ended December 28, 2003, is not fully comparable to the segment information for all prior periods presented.
In addition, we introduced our 64-bit microprocessor products during 2003 with the launch of our AMD Opteron processor for servers and workstations in
April and our AMD Athlon 64 processor for desktop and mobile PCs in September. In November 2003, we began construction of a new 300-millimeter wafer
fabrication facility in Dresden, Germany, which we expect to be in volume production in 2006. We believe the new capacity provided by this facility will allow
us to satisfy anticipated demand for our 64-bit microprocessors. In addition to providing increased capacity, we believe that manufacturing our 64-bit processors
on 300-millimeter silicon wafers, and employing advanced manufacturing process technologies, will allow us to reduce our manufacturing costs.
For 2004, we believe critical success factors include: increasing market acceptance of 64-bit computing; our and FASL LLC’s ability to successfully
develop and transition to the latest manufacturing process technologies; our ability to develop and introduce new products for the server and workstation markets
on a timely basis and increasing our share of those markets; expanding our participation in emerging global markets, including China, Latin America, India, and
Eastern Europe; improving our share of the Flash memory market, including enabling the increased adoption of MirrorBit technology; and maximizing the
synergies of FASL LLC.
We intend the discussion of our financial condition and results of operations that follows to provide information that will assist you in understanding our
financial statements, the changes in certain key items in those financial statements from year to year, the primary factors that resulted in those changes, and how
certain accounting principles, policies and estimates affect our financial statements.
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Source: ADVANCED MICRO DEVIC, 10-K, March 09, 2004