AMD 2014 Annual Report Download - page 24

Other risks associated with our dependence on third-party manufacturers include limited control over
delivery schedules and quality assurance, lack of capacity in periods of excess demand, misappropriation of our
intellectual property, dependence on several small undercapitalized subcontractors and limited ability to manage
inventory and parts. Moreover, if any of our third-party manufacturers suffer any damage to facilities, lose
benefits under material agreements, experience power outages, lack sufficient capacity to manufacture our
products, encounter financial difficulties, are unable to secure necessary raw materials from their suppliers or
suffer any other disruption or reduction in efficiency, we may encounter supply delays or disruptions. If we are
unable to secure sufficient or reliable supplies of products, our ability to meet customer demand may be
adversely affected and this could materially affect our business.
If we transition the production of some of our products to new manufacturers, we may experience delayed
product introductions, lower yields or poorer performance of our products. If we experience problems with
product quality or are unable to secure sufficient capacity from a particular third-party manufacturer, or if we for
other reasons cease utilizing one of those suppliers, 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 third-party manufacturers, which could have a material adverse effect on our
business.
Failure to achieve expected manufacturing yields for our products could negatively impact our financial
results.
Semiconductor manufacturing yields are a result of both product design and process technology, which is
typically proprietary to the manufacturer, and low yields can result from design failures, process technology
failures or a combination of both. Our third-party foundries, including GF, are responsible for the process
technologies used to fabricate silicon wafers. If our third-party foundries experience manufacturing inefficiencies
or encounter disruptions, errors or difficulties during production, we may fail to achieve acceptable yields or
experience product delivery delays. We cannot be certain that our third-party foundries will be able to develop,
obtain or successfully implement leading-edge process technologies needed to manufacture future generations of
our products profitably or on a timely basis or that our competitors will not develop new technologies, products
or processes earlier. Moreover, during periods when foundries are implementing new process technologies, their
manufacturing facilities may not be fully productive. A substantial delay in the technology transitions to smaller
process technologies could have a material adverse effect on us, particularly if our competitors transition to more
cost effective technologies before us. Any decrease in manufacturing yields could result in an increase in per unit
costs, which would adversely impact our gross margin and/or force us to allocate our reduced product supply
amongst our customers, which could harm our relationships with our customers and reputation and materially
adversely affect our business.
The success of our business is dependent upon our ability to introduce products on a timely basis with features
and performance levels that provide value to our customers while supporting and coinciding with significant
industry transitions.
Our success depends to a significant extent on the development, qualification, implementation and
acceptance of new product designs and improvements that provide value to our customers. Our ability to
develop, qualify and distribute, and have manufactured, new products and related technologies to meet evolving
industry requirements, at prices acceptable to our customers and on a timely basis are significant factors in
determining our competitiveness in our target markets. For example, form factors continue to shift from desktop
PCs and notebooks to tablets. Historically, a significant portion of our Computing and Graphics revenue has been
related to desktop PCs. As consumers adopt new form factors, have new product feature preferences or have
different requirements than those consumers in the PC market, PC sales could be negatively impacted, which
could negatively impact our business. Currently, a large portion of our business is focused on the consumer PC
portions of the market, which has experienced a decline driven by the adoption of smaller form factors and
increased competition. If we fail to or are delayed in developing, qualifying or shipping new products or
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