AMD 2011 Annual Report Download - page 34

These agreements are non-exclusive and permit both our distributors and AIBs to offer our competitors’
products. We are dependent on our distributors and AIBs to supplement our direct marketing and sales efforts. If
any significant distributor or AIB or a substantial number of our distributors or AIBs terminated their relationship
with us or decided to market our competitors’ products over our products, our ability to bring our products to
market would be impacted and we would be materially adversely affected.
Additionally, distributors and AIBs typically maintain an inventory of our products. In most instances, our
agreements with distributors protect their inventory of our products against price reductions, as well as provide
return rights for any product that we have removed from our price book and that is not more than twelve months
older than the manufacturing code date. Some agreements with our distributors also contain standard stock
rotation provisions permitting limited levels of product returns. Our agreements with AIBs protect their inventory
of our products against price reductions. We defer the gross margins on our sales to distributors and AIBs,
resulting from both our deferral of revenue and related product costs, until the applicable products are re-sold by
the distributors or the AIBs. However, in the event of a significant decline in the price of our products, the price
protection rights we offer would materially adversely affect us because our revenue would decline.
Our worldwide operations are subject to political and economic risks and natural disasters, which could have
a material adverse effect on us.
We maintain operations around the world, including in the United States, Canada, Europe and Asia. We rely
on third party wafer foundries in Europe and Asia. Nearly all product assembly and final testing of our products
is performed at manufacturing facilities, operated by us as well as third party manufacturing facilities, in China,
Malaysia, Singapore and Taiwan. We also have international sales operations. International sales, as a percent of
net revenue were 93% in 2011. We expect that international sales will continue to be a significant portion of total
sales in the foreseeable future.
The political and economic risks associated with our operations in foreign countries include, without
limitation:
• expropriation;
• changes in a specific country’s or region’s political or economic conditions;
• changes in tax laws, trade protection measures and import or export licensing requirements;
• difficulties in protecting our intellectual property;
• difficulties in managing staffing and exposure to different employment practices and labor laws;
• changes in foreign currency exchange rates;
• restrictions on transfers of funds and other assets of our subsidiaries between jurisdictions;
• changes in freight and interest rates;
• disruption in air transportation between the United States and our overseas facilities;
• loss or modification of exemptions for taxes and tariffs; and
• compliance with U.S. laws and regulations related to international operations, including export control
regulations and the Foreign Corrupt Practices Act.
In addition, our worldwide operations could be subject to natural disasters such as earthquakes, tsunamis,
flooding, typhoons and volcanic eruptions that disrupt manufacturing or other operations. For example, our
Sunnyvale operations are located near major earthquake fault lines in California. Any conflict or uncertainty in
the countries in which we operate, including public health or safety, natural disasters, fire, disruptions of service
from utilities, nuclear power plant accidents, or general economic or political factors, could have a material
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