Intel 2006 Annual Report Download - page 24

Table of Contents
ITEM 1A. RISK FACTORS
Fluctuations in demand for our products may adversely affect our financial results and are difficult to forecast.
If demand for our products fluctuates, our revenue and gross margin could be adversely affected. Important factors that could
cause demand for our products to fluctuate include:
If demand for our products is reduced, our manufacturing and/or assembly and test capacity could be under-utilized, and we
may be required to record an impairment on our long-lived assets including facilities and equipment, as well as intangible
assets, which would increase our expenses. In addition, factory planning decisions may shorten the useful lives of long-lived
assets including facilities and equipment and cause us to accelerate depreciation. In the long term, if demand for our products
increases, we may not be able to add manufacturing and/or assembly and test capacity fast enough to meet market demand.
These changes in demand for our products, and changes in our customers’ product needs, could have a variety of negative
effects on our competitive position and our financial results, and, in certain cases, may reduce our revenue, increase our costs,
lower our gross margin percentage, or require us to recognize impairments of our assets. In addition, if demand for our
products is reduced or we fail to accurately forecast demand, we could be required to write down inventory, which would have
a negative impact on our gross margin.
The semiconductor industry and our operations are characterized by a high percentage of costs that are fixed or otherwise
difficult to reduce in the short term, and by product demand that is highly variable and subject to significant downturns
that may adversely affect our business, results of operations, and financial condition.
The semiconductor industry and our operations are characterized by high costs, such as those related to facility construction
and equipment, research and development, and employment and training of a highly skilled workforce, that are either fixed or
difficult to reduce in the short term. At the same time, demand for our products is highly variable and there have been
downturns, often in connection with maturing product cycles as well as downturns in general economic market conditions.
These downturns have been characterized by reduced product demand, manufacturing overcapacity, high inventory levels, and
lower average selling prices. The combination of these factors may cause our revenue, gross margin, cash flow, and
profitability to vary significantly in both the short and long term.
We operate in intensely competitive industries, and our failure to respond quickly to technological developments and
incorporate new features into our products could have an adverse effect on our ability to compete.
We operate in intensely competitive industries that experience rapid technological developments, changes in industry
standards, changes in customer requirements, and frequent new product introductions and improvements. If we are unable to
respond quickly and successfully to these developments, we may lose our competitive position, and our products or
technologies may become uncompetitive or obsolete. To compete successfully, we must maintain a successful R&D effort,
develop new products and production processes, and improve our existing products and processes at the same pace or ahead of
our competitors. We may not be able to successfully develop and market these new products, the products we invest in and
develop may not be well received by customers, and products developed and new technologies offered by others may affect
the demand for our products. These types of events could have a variety of negative effects on our competitive position and
our financial results, such as reducing our revenue, increasing our costs, lowering our gross margin percentage, and requiring
us to recognize impairments of our assets.
Fluctuations in the mix of products sold may adversely affect our financial results.
Because of the wide price differences among mobile, desktop, and server microprocessors, the mix and types of performance
capabilities of microprocessors sold affect the average selling price of our products and have a substantial impact on our
revenue. Our financial results also depend in part on the mix of other products we sell, such as chipsets, flash memory, and
other semiconductor products. In addition, more recently introduced products tend to have higher associated costs because of
initial overall development costs and higher start-up costs. Fluctuations in the mix and types of our products may also affect
the extent to which we are able to recover our fixed costs and investments that are associated with a particular product, and as
a result can negatively impact our financial results.
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• competitive pressures from companies that have competing products, chip architectures, and manufacturing
technologies including product offerings, marketing programs, and pricing pressures;
•
changes in customer product needs;
•
changes in the level of customers
’
component inventory;
•
changes in business and economic conditions, including a downturn in the semiconductor industry;
•
strategic actions taken by our competitors; and/or
•
market acceptance of our products.