Adaptec 2003 Annual Report Download - page 40

approaches requiring integrated circuits. Our competitors may have more opportunities to supplant our products in next generation
systems because of the shortening product life and design−in cycles in many of our customers’ products.
In addition, as semiconductors sourced from third party suppliers comprise a greater portion of the total materials cost in OEM
equipment, OEMs are becoming more price conscious than in the past. We have also experienced price aggressiveness from some
competitors that wish to enter into the market segments in which we participate. These circumstances may make some of our products
price−uncompetitive or force us to match low prices. We may lose design opportunities or may experience overall declines in gross
margins as a result of increased price competition.
We are facing additional competition from companies who have excess capacity and who are able to offer our OEM customers similar
products to ours. Excess capacity, in tandem with the reduced demand for OEM equipment, has created downward pricing pressure
on our products.
The markets for our products are intensely competitive and subject to rapid technological advancement in design tools, wafer
manufacturing techniques, process tools and alternate networking technologies. We may not be able to develop new products at
competitive pricing and performance levels. Even if we are able to do so, we may not complete a new product and introduce it to
market in a timely manner. Our customers may substitute use of our products in their next generation equipment with those of current
or future competitors.
Increasing competition in our industry will make it more difficult to achieve design wins.
We face significant competition from two major fronts. First, we compete against established peer−group semiconductor companies
that focus on the communications semiconductor business. These companies include Agere Systems, Applied Micro Circuits
Corporation, Broadcom, Exar Corporation, Conexant Systems, Marvell Technology Group, Multilink Technology Corporation,
Silicon Image, Transwitch and Vitesse Semiconductor. These companies are well financed, have significant communications
semiconductor technology assets, have established sales channels, and are dependent on the market in which we participate for the
bulk of their revenues.
Other competitors include major domestic and international semiconductor companies, such as Agilent, Cypress Semiconductor, Intel,
IBM, Infineon, Integrated Device Technology, Maxim Integrated Products, Motorola, Nortel Networks, and Texas Instruments. These
companies are concentrating an increasing amount of their substantial financial and other resources on the markets in which we
participate. This represents a serious competitive threat to us.
Over the next few years, we expect additional competitors, some of which may also have greater financial and other resources, to enter
the market with new products. These companies, individually or collectively, could represent future competition for many design
wins, and subsequent product sales.
35