AMD 2003 Annual Report Download - page 54

Table of Contents
Our ability to increase microprocessor product revenues and benefit fully from the substantial investments we have made and continue to make related to
microprocessors depends on the success of our AMD Opteron and AMD Athlon 64 processors and the continuing success of our AMD Athlon XP and AMD
Duron microprocessors. If we fail to achieve continued and expanded market acceptance of our microprocessors, we may be materially adversely affected.
If we were to lose Microsoft Corporation’s support for our products, our ability to market our processors would be materially adversely affected. Our
ability to innovate beyond the x86 instruction set controlled by Intel depends on Microsoft’s designing and developing its operating systems to run on or support
our microprocessor products. If Microsoft does not continue to design and develop its operating systems so that they work with our x86 instruction sets,
including our AMD64 technology introduced with our AMD Opteron and AMD Athlon 64 processors, independent software providers may forego designing
their software applications to take advantage of our innovations and customers may not purchase PCs with our microprocessors. If we fail to retain the support of
Microsoft, our ability to market our processors could be materially adversely affected.
The loss of a significant customer for our Spansion Flash memory products in the high-end mobile telephone market, or a lack of market acceptance of
FASL LLC’s MirrorBit technology may have a material adverse effect on us. Since the third quarter of 2002, our Flash memory product sales growth was
almost entirely based on strength in the high-end mobile phone market. To date, our sales in that market have been concentrated with a few customers. In
addition, we expect competition in the market for Flash memory devices to continue to increase as new competitors enter the Flash memory market, particularly
the NOR segment, existing competing manufacturers introduce new products or pursue aggressive pricing strategies and industry-wide production capacity
increases. We may be unable to maintain or increase our market share in Flash memory devices as the market develops and other competitors introduce new
competing products. A decline in unit sales of our Flash memory devices, lower average selling prices, a downturn in the mobile phone market or a loss of a
significant mobile phone customer, would have a material adverse effect on us.
In July 2002, we commenced production shipments of the first product with MirrorBit technology. MirrorBit technology is a memory cell architecture that
enables Flash memory products to hold twice as much data as standard Flash memory devices. A lack of customer or market acceptance, or any substantial
difficulty in transitioning Flash memory products, including those based on MirrorBit technology, to any future process technology could reduce FASL LLC’s
ability to be competitive in the market and could have a material adverse effect on us.
Spansion Flash memory products are based on the NOR architecture, and a significant market shift to the NAND architecture could materially adversely
affect us. Spansion Flash memory products are based on the Boolean logic-based NOR (Not Or) architecture, which is typically used for code execution. FASL
LLC does not manufacture products based on NAND (Not And) architecture, which typically offers greater storage capacity. During 2003, sales of products
based on NAND architecture have grown at higher rates than sales of NOR products. This has resulted in the NAND vendors gaining a greater share of the
overall Flash market. Any significant shift in the marketplace to products based on NAND architecture or other architectures may reduce the total market
available to us and therefore reduce our market share, which could have a material adverse effect on us.
Worldwide economic and political conditions may affect demand for our products and slow payment by our customers. The recent economic slowdown
in the United States and worldwide, exacerbated by the occurrence and threat of terrorist attacks and consequences of sustained military action in the Middle
East, adversely affected demand for our products. Although economic conditions began to improve in the second half of 2003, another decline of the worldwide
semiconductor market or a future decline in economic conditions in any significant geographic area would likely decrease the overall demand for our products,
which could have a material adverse effect on us. If the economic slowdown returns as a result of terrorist activities, military action or otherwise, it could
adversely impact our customers’ ability to pay us in a timely manner.
49
Source: ADVANCED MICRO DEVIC, 10-K, March 09, 2004