AMD 2009 Annual Report Download - page 34

The markets in which our products are sold are highly competitive.
The markets in which our products are sold are very competitive, and delivering the latest and best products
to market on a timely basis is critical to achieving revenue growth. We expect competition to intensify due to
rapid technological changes, frequent product introductions and aggressive pricing by competitors. We believe
that the main factors that determine our product competitiveness are timely product introductions, product
quality, power consumption, reliability, selling price, speed, size (or form factor), cost, adherence to industry
standards, software and hardware compatibility and stability and brand.
Typically, after a product is introduced, costs and the average selling price normally decrease over time as
production efficiency improves, and successive generations of products are developed and introduced for sale.
Recently, as a result of the credit market crisis and other macroeconomic challenges currently affecting the
global economy, end user demand for PCs and servers decreased significantly. Although end-user PC demand
stabilized in the second half of 2009, consumers are focusing more on the price of PCs as a key factor in their
buying decision. In turn, OEMs have applied pressure on semiconductor suppliers to reduce component prices,
which has materially adversely affected the average selling price.
We expect that competition will continue to be intense in these markets and our competitors’ products may
be less costly, provide better performance or include additional features that render our products uncompetitive.
For example, Intel is transitioning to 32 nm process technology before us. Using a more advanced process
technology can contribute to lower product manufacturing costs and improve a product’s performance and power
efficiency. Some competitors may have greater access or rights to companion technologies, including interface,
processor and memory technical information. Competitive pressures could adversely impact the demand for our
products, which could harm our revenue and gross margin.
Our operating results are subject to quarterly and seasonal sales patterns.
A substantial portion of our quarterly sales have historically been made in the last month of the quarter. This
uneven sales pattern makes prediction of revenues for each financial period difficult and increases the risk of
unanticipated variations in quarterly results and financial condition. In addition, our operating results tend to vary
seasonally. For example, demand in the retail sector of the PC market is often stronger during the fourth quarter
as a result of the winter holiday season and weaker in the first quarter. European sales are often weaker during
the summer months. Many of the factors that create and affect seasonal trends are beyond our control.
If essential equipment or materials are not available to manufacture our products, we could be materially
adversely affected.
Our operations depend upon obtaining deliveries of adequate supplies of materials on a timely basis. We
purchase equipment and materials from a number of suppliers. From time to time, suppliers may extend lead
times, limit supply to us or increase prices due to capacity constraints or other factors. Because some of the
materials that we purchase are complex, it is difficult for us to substitute one supplier for another. Certain raw
materials that are used in the manufacture of our products are available only from a limited number of suppliers.
For example, the manufacturing of our microprocessor products is largely dependent on one supplier of our
silicon-on-insulator (SOI) wafers. We are also dependent on key chemicals from a limited number of suppliers
and rely on a limited number of foreign companies to supply the majority of certain types of integrated circuit
packages for our microprocessor products. Similarly, certain non-proprietary materials or components such as
memory, PCBs, substrates and capacitors used in the manufacture of our graphics products are currently
available from only a limited number of sources and are often subject to rapid changes in price and availability.
Interruption of supply or increased demand in the industry could cause shortages and price increases in various
essential materials. The macroeconomic challenges affecting the global economy may impact our key suppliers
who may reduce their output and become insolvent which may adversely impact our ability to procure key
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