Adaptec 2003 Annual Report Download - page 45

manufacturing yields and costs than competitors with their own fabrication facilities. If the foundries we use are unable or unwilling
to manufacture our products in required volumes, we may have to identify and qualify acceptable additional or alternative foundries.
This qualification process could take six months or longer. We may not find sufficient capacity quickly enough, if ever, to satisfy our
production requirements.
Some companies that supply our customers are similarly dependent on a limited number of suppliers to produce their products. These
other companies’ products may be designed into the same networking equipment into which our products are designed. Our order
levels could be reduced materially if these companies are unable to access sufficient production capacity to produce in volumes
demanded by our customers because our customers may be forced to slow down or halt production on the equipment into which our
products are designed.
We depend on third parties in Asia for assembly of our semiconductor products that could delay and limit our product shipments.
Sub−assemblers in Asia assemble all of our semiconductor products. Raw material shortages, political and social instability, assembly
house service disruptions, currency fluctuations, or other circumstances in the region could force us to seek additional or alternative
sources of supply or assembly. This could lead to supply constraints or product delivery delays that, in turn, may result in the loss of
revenues. We have less control over delivery schedules, assembly processes, quality assurances and costs than competitors that do not
outsource these tasks.
Our business is vulnerable to interruption by earthquake, fire, power loss, telecommunications failure, terrorist activity and other
events beyond our control.
We do not have sufficient business interruption insurance to compensate us for actual losses from interruption of our business that
may occur, and any losses or damages incurred by us could have a material adverse effect on our business. We are vulnerable to a
major earthquake and other calamities. We have operations in seismically active regions in California, and we rely on third−party
wafer fabrication facilities in seismically active regions in Asia. We have not undertaken a systematic analysis of the potential
consequences to our business and financial results from a major earthquake in either region, and do not have a recovery plan for
earthquake, fire, power loss, terrorist activity or similar disasters. We are unable to predict the effects of any such event, but the
effects could be seriously harmful to our business.
We depend on a limited number of design software suppliers, the loss of which could impede our product development.
A limited number of suppliers provide the computer aided design, or CAD, software we use to design our products. Factors affecting
the price, availability or technical capability of these products could affect our ability to access appropriate CAD tools for the
development of highly complex products. In particular, the CAD software industry has been the subject of extensive intellectual
property rights litigation, the results of which could materially change the pricing and nature of the software we use. We also have
limited control over whether our software suppliers will be able to overcome technical barriers in time to fulfill our needs.
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