AMD 2011 Annual Report Download - page 17

AIB Manufacturers and System Integrators
We strive to establish and broaden our relationships with AIB manufacturers. We offer component-level
graphics and chipset products to AIB manufacturers who in turn build and sell board-level products using our
technology to system integrators, or SIs, and at retail. Our agreements with AIBs protect their inventory of our
products against price reductions. We also sell directly to our SI customers. SIs typically sell from positions of
regional or product-based strength in the market. They usually operate on short design cycles and can respond
quickly with new technologies. SIs often use discrete graphics solutions as a means to differentiate their products
and add value to their customers.
Competition
Generally, the IC industry is intensely competitive. Products typically compete on product quality, power
consumption (including battery life), reliability, speed, performance, size (or form factor), cost, selling price,
adherence to industry standards (and the creation of open industry standards), software and hardware
compatibility and stability, brand recognition, timely product introductions and availability. Technological
advances in the industry result in frequent product introductions, regular price reductions, short product life
cycles and increased product capabilities that may result in significant performance improvements. Our ability to
compete depends on our ability to develop, introduce and sell new products or enhanced versions of existing
products on a timely basis and at competitive prices, while reducing our costs.
Competition in the Microprocessor Market
Intel Corporation has dominated the market for microprocessors for many years. Intel’s market share,
margins and significant financial resources enable it to market its products aggressively, to target our customers
and our channel partners with special incentives, and to discipline customers who do business with us. These
aggressive activities have in the past and are likely in the future to result in lower unit sales and a lower average
selling price for our products and adversely affect our margins and profitability.
Intel exerts substantial influence over computer manufacturers and their channels of distribution through
various brand and other marketing programs. As a result of Intel’s dominant position in the microprocessor
market, Intel has been able to control x86 microprocessor and computer system standards and benchmarks and to
dictate the type of products the microprocessor market requires of us. Intel also dominates the computer system
platform, which includes core logic chipsets, graphics chips, motherboards and other components necessary to
assemble a computer system. OEMs that purchase microprocessors for computer systems are highly dependent
on Intel, less innovative on their own and, to a large extent, are distributors of Intel technology. Additionally,
Intel is able to drive de facto standards for x86 microprocessors that could cause us and other companies to have
delayed access to such standards.
Intel has substantially greater financial resources than we do and accordingly spends substantially greater
amounts on research and development than we do. We expect Intel to maintain its dominant position and to
continue to invest heavily in marketing, research and development, new manufacturing facilities and other
technology companies. To the extent Intel manufactures a significantly larger portion of its microprocessor
products using more advanced process technologies, or introduces competitive new products into the market
before we do, we may be more vulnerable to Intel’s aggressive marketing and pricing strategies for
microprocessor products.
Intel also leverages its dominance in the microprocessor market to sell its integrated chipsets. Intel
manufactures and sells integrated graphics chipsets bundled with their microprocessors and is a dominant
competitor with respect to this portion of our business. The continued improvement of the quality of Intel’s
integrated graphics, along with higher unit shipments of our APU products, may drive computer manufacturers to
reduce the number of systems they build paired with discrete graphics components, particularly for mobile PCs,
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