AMD 2009 Annual Report Download - page 29

facilities. Because of our commitments to GF, during periods in which we under-utilize GF manufacturing
facilities as a result of reduced demand for our microprocessor products, we may not be able to reduce our costs
in proportion to the reduced revenues for such a period. When this occurs, our operating results will be materially
adversely affected.
We rely on third-party foundries and other contractors to manufacture our graphics and chipset products.
In addition to relying on GF to manufacture substantially all of our microprocessor products, we currently
rely on other independent foundries to manufacture our graphics and chipset products. We also rely on third-
party manufacturers to manufacture our high end graphics boards. Independent contractors perform the assembly,
testing and packaging of these products. We obtain these manufacturing services for our graphics and chipset
products on a purchase order basis and these manufacturers are not required to provide us with any specified
minimum quantity of product. Accordingly, our graphics business depends on these suppliers to allocate to us a
portion of their manufacturing capacity sufficient to meet our needs, to produce products of acceptable quality
and at acceptable manufacturing yields and to deliver those products to us on a timely basis at acceptable prices.
We cannot assure you that these manufacturers will be able to meet our near-term or long-term manufacturing
requirements. For example, in the second half of 2009, we experienced supply constraints for our latest
generation of graphics products. The manufacturers we use also fabricate wafers and assemble, test and package
products for other companies, including certain of our competitors. They could choose to prioritize capacity for
other users, reduce or eliminate deliveries to us, or increase the prices that they charge us on short notice.
We must have reliable relationships with our wafer manufacturers and subcontractors to ensure adequate
product supply to respond to customer demand. If we move production of our products to new manufacturers or
if current manufacturers implement new process technology or design rules, any transition difficulties may result
in lower yields or poorer performance of our products.
Because it could take several quarters to establish a strategic relationship with a new manufacturing partner,
we may be unable to secure an alternative supply for any specific product in a short time frame. We could
experience significant delays in the shipment of our products if we are required to find alternative foundries or
contractors. Other risks associated with our dependence on third-party manufacturers, including GF, include
reduced control over delivery schedules, quality assurance, manufacturing yields and cost, lack of capacity in
periods of excess demand, misappropriation of our intellectual property, dependence on several small
undercapitalized subcontractors, reduced ability to manage inventory and parts, and exposure to foreign countries
and operations. If we are unable to secure sufficient or reliable supplies of wafers, our ability to meet customer
demand for our graphics business may be adversely affected and this could have a material adverse effect on us.
We depend on third-party companies for the design, manufacture and supply of motherboards, BIOS
software and other computer platform components.
We depend on third-party companies for the design, manufacture and supply of motherboards, BIOS
software and other components that support our microprocessor offerings.
Our microprocessors are not designed to function with motherboards and chipsets designed to work with
Intel microprocessors. If we are unable to secure sufficient support for our microprocessor products from
designers and manufacturers of motherboards, our business would be materially adversely affected. If the
designers, manufacturers and suppliers of motherboards and other components decrease their support for our
product offerings, our business could be materially adversely affected.
Failure to achieve expected manufacturing yields for our products could negatively impact our financial
results.
Semiconductor manufacturing yields are a function of both product design and process technology, which is
typically proprietary to the manufacturer, and low yields can result from either design or process technology
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