AMD 2003 Annual Report Download - page 55

Table of Contents
Manufacturing capacity constraints and manufacturing capacity utilization rates may adversely affect us. There may be situations in which our
manufacturing facilities are inadequate to meet the demand for certain of our products. Our inability to obtain sufficient manufacturing capacity to meet demand,
either in our own facilities or through foundry or similar arrangements with others, could have a material adverse effect on us. If we do not transition to
90-nanometer manufacturing process technology at Fab 30 on a timely basis, we may not be able to meet the demand for certain of our microprocessor products.
In addition, FASL LLC’s manufacturing facilities may be inadequate to meet our demand for certain Flash memory products. As a result, FASL LLC may not be
able to provide us with sufficient quantities of these products to allow us to meet demand for these products from our customers.
At times we may underutilize our manufacturing facilities as a result of reduced demand for certain of our products. We are substantially increasing our
manufacturing capacity by building Fab 36, transitioning to smaller manufacturing process technologies and making significant capital investments in Fab 30. In
addition, FASL LLC is increasing its manufacturing capacity by transitioning to smaller manufacturing process technologies, expanding Fab 25, JV1, JV2, and
JV3 and increasing the capacity of its assembly and test facilities to accommodate both a growth in units that transition to higher densities and an increase in
MCP products. If the increase in demand for our products is not consistent with our expectations, we and FASL LLC may underutilize manufacturing facilities,
and we could be materially adversely affected. This has in the past had, and in the future may have, a material adverse effect on our earnings and cash flow.
We believe that at this time, the most significant risk is manufacturing capacity constraint.
Unless we maintain manufacturing efficiency, our future profitability could be materially adversely affected. Manufacturing semiconductor components
involves highly complex processes that require advanced equipment. We and our competitors continuously modify these processes in an effort to improve yields
and product performance, and decrease costs. During 2004, we plan to transition our microprocessor production to 90-nanometer process technology, and FASL
LLC intends to transition the production of certain of its memory products to 110-nanometer process technology. During periods when we or FASL LLC are
implementing new process technologies, our or FASL LLC’s manufacturing facilities may not be fully productive. Substantial delay in the technology transitions
in Fab 30 to smaller process technologies employing silicon-on-insulator technology and in FASL LLC’s wafer fabrication facilities to smaller geometries could
have a material adverse effect on us, particularly if our competitors transition to more cost effective technologies earlier than we do. For example, Intel currently
manufactures certain microprocessor products on 300-millimeter wafers using 90-nanometer process technology. Use of 90-nanometer technology can result in
products that are higher performing, use less power and that cost less to manufacture. Use of 300-millimeter wafers can decrease manufacturing costs and
increase capacity by yielding more equivalent chips per wafer than 200-millimeter wafers. We have not yet made comparable transitions at our microprocessor
manufacturing facilities. Furthermore, impurities or other difficulties in the manufacturing process can lower yields. Our manufacturing efficiency will be an
important factor in our future profitability, and we cannot be sure that we will be able to maintain our manufacturing efficiency or increase manufacturing
efficiency to the same extent as our competitors.
We may experience manufacturing problems in achieving acceptable yields or product delivery delays in the future as a result of, among other things,
capacity constraints, construction delays, delays in meeting the milestones set forth in our joint development agreement with IBM, upgrading or expanding
existing facilities, or changing our process technologies, which could result in a loss of future revenues. Our results of operations could also be adversely affected
by the increase in fixed costs and operating expenses related to increases in production capacity if revenues do not increase proportionately.
External factors, such as the SARS virus, bird flu and potential terrorist attacks and other acts of violence or war, may materially adversely affect us. In
early 2003, the severe acute respiratory syndrome (SARS) virus
50
Source: ADVANCED MICRO DEVIC, 10-K, March 09, 2004