AMD 2009 Annual Report Download - page 28

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typically not use our products in their systems until at least the next design configuration. The process of being
qualified for inclusion in a customer’s system can be lengthy and could cause us to further miss a cycle in the
demand of end-users, which also could result in a loss of market share and harm our business.
Moreover, market demand requires that products incorporate new features and performance standards on an
industry-wide basis. Over the life of a specific product, the average selling price undergoes regular price
reductions. The introduction of new products and enhancements to existing products is necessary to maintain an
overall corporate average selling price. If we are unable to introduce new products or launch new products with
sufficient increases in average selling price or increased unit sales volumes capable of offsetting these reductions
in the average selling price of existing products, our revenues, inventories, gross margins and operating results
could be materially adversely affected.
Our ability to design and introduce new products in a timely manner is dependent upon third-party
intellectual property.
In the design and development of new products and product enhancements, we rely on third-party
intellectual property such as software development tools and hardware testing tools. The design requirements
necessary to meet consumer demands for more features and greater functionality from semiconductor products in
the future may exceed the capabilities of the third-party development tools available to us. If the third-party
intellectual property that we use becomes unavailable or fails to produce designs that meet consumer demands,
our business could be materially adversely affected.
We rely on GF to manufacture our microprocessor products, and if GF is unable to manufacture our
products on a timely basis or to meet our capacity requirements, our business could be
materially adversely affected.
We rely on GF to manufacture our microprocessor products. If GF suffers any damage to its facilities, is
unable to secure necessary raw materials from its suppliers, loses benefits under its material agreements such as
its joint development agreement with IBM, is unable to obtain funding from ATIC under the Funding Agreement
or otherwise, experiences power outages, lacks sufficient capacity to manufacture our products, encounters
financial difficulties due to litigation or otherwise or suffers any other disruption or reduction in efficiency of
foundry capacity, we may encounter supply delays or disruptions, which could materially adversely impact our
business. If GF is unable to remain competitive using advanced process technologies or is unable to manufacture
our products on a timely basis or meet our capacity requirements, our business could be materially adversely
affected. If we are unable to obtain sufficient supply from GF, we would have to move production of our
products to new manufacturers, which could result in significant delays. In January 2010, GF announced that it is
integrating operations with Chartered. With Chartered, GF significantly expanded its customer base to over 150
customers. Although GFs manufacturing capacity also increased, the integration process and the increased
customer base could lead to delays or disruptions in manufacturing our products, which would adversely impact
our business.
In addition, pursuant to the Wafer Supply Agreement between us and GF, we compensate GF on a cost plus-
basis, which results in increased per unit manufacturing costs for AMD compared to manufacturing wafers
in-house. Although this cost-plus arrangement has not impacted our consolidated financial statements while we
were consolidating the financial results of GF, as of 2010, we no longer consolidate the financial results of GF,
and this cost-plus arrangement may have a negative impact on our reported gross margins. If GF fails to operate
at a competitive cost level, our business could be materially adversely affected.
The under-utilization of GF manufacturing facilities may increase our per unit costs and may have a
material adverse effect on us.
It is difficult to predict future growth or decline in the demand for our products, making it difficult to
forecast our requirements accurately. If our target markets do not grow, we may under-utilize GF manufacturing
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