AMD 2003 Annual Report Download - page 52

Table of Contents
• the possibility that global business and economic conditions will worsen, resulting in lower than currently expected demand for Flash memory
products.
We cannot assure you that we will be able to successfully integrate these operations or that we will be able to achieve and sustain any benefit from FASL
LLC’s creation.
Intel Corporation’s dominance of the microprocessor market, its position in the Flash memory market and its business practices may limit our ability to
compete effectively. Intel has dominated the market for microprocessors used in desktop and mobile PCs for many years. Intel is also a significant competitor in
the server segment of the microprocessor market and in the Flash memory market. Because of its dominant position, Intel has been able to control x86
microprocessor and PC system standards and dictate the type of products the microprocessor market requires of Intel’s competitors. In addition, Intel’s
significant financial resources allow it to market its products aggressively, to target our customers and our channel partners with special incentives, and to
discipline customers who do business with us. These aggressive activities can result in lower unit sales and average selling prices for our products and adversely
affect our margins and profitability. Intel also exerts substantial influence over PC manufacturers and their channels of distribution through the “Intel Inside”
brand program and other marketing programs. As long as Intel remains in this dominant position, we may be materially adversely affected by its:
• pricing and allocation strategies and actions;
• product mix and introduction schedules;
• product bundling, marketing and merchandising strategies;
• exclusivity payments to its current and potential customers;
• control over industry standards, PC manufacturers and other PC industry participants, including motherboard, chipset and basic input/output system, or
BIOS, suppliers; and
• user brand loyalty.
Intel also dominates the PC system platform. As a result, PC OEMs are highly dependent on Intel, less innovative on their own and, to a large extent, are
distributors of Intel technology. In marketing our microprocessors to OEMs we depend on third-party companies other than Intel for the design and manufacture
of core-logic chipsets, graphics chips, motherboards, BIOS software and other components. In recent years, many of these third-party designers and
manufacturers have lost significant market share to Intel or exited the business. In addition, these companies produce chipsets, motherboards, BIOS software and
other components to support each new generation of Intel’s microprocessors, and Intel has significant leverage over their business opportunities.
We do not currently plan to develop microprocessors that are bus interface protocol compatible with Intel microprocessors because our patent-cross license
agreement with Intel does not extend to microprocessors that are bus interface protocol compatible with Intel’s six and subsequent generation processors. Thus,
our microprocessors are not designed to function with motherboards and chipsets designed to work with Intel microprocessors. Our ability to compete with Intel
in the market for microprocessors will depend on our ability to develop relationships with infrastructure providers and ensure that these third-party designers and
manufacturers design PC platforms to support new generations of our microprocessors. A failure of the designers and producers of motherboards, chipsets and
other system components to support our microprocessor offerings, particularly our new AMD Athlon 64 and AMD Opteron microprocessors, would have a
material adverse effect on us.
We expect Intel to maintain its dominant position in the microprocessor market as well as to continue to invest heavily in research and development, new
manufacturing facilities and other technology companies. Intel has substantially greater financial resources than we do and accordingly spends substantially
greater amounts on research and development than we do. We expect competition from Intel to increase in 2004 and beyond to the
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Source: ADVANCED MICRO DEVIC, 10-K, March 09, 2004