3Ware 2002 Annual Report Download - page 23

To develop new products for the communications markets, we must develop, gain access to and use leading
technologies in a cost-effective and timely manner and continue to develop technical and design expertise. In
addition, we must have our products designed into our customers’ future products and maintain close working
relationships with key customers in order to develop new products that meet customers’ changing needs. We
must respond to changing industry standards, trends towards increased integration and other technological
changes on a timely and cost-effective basis. If we fail to achieve design wins with key customers, our business
will significantly suffer because once a customer has designed a supplier’s product into its system, the customer
typically is extremely reluctant to change its supply source due to significant costs associated with qualifying a
new supplier.
Products for communications applications are based on industry standards that are continually evolving. Our
ability to compete in the future will depend on our ability to identify and ensure compliance with these evolving
industry standards. The emergence of new industry standards could render our products incompatible with
products developed by major systems manufacturers. As a result, we could be required to invest significant time
and effort and to incur significant expense to redesign our products to ensure compliance with relevant standards.
If our products are not in compliance with prevailing industry standards for a significant period of time, we could
miss opportunities to achieve crucial design wins. We may not be successful in developing or using new
technologies or in developing new products or product enhancements that achieve market acceptance. Our
pursuit of necessary technological advances may require substantial time and expense.
The markets in which we compete are highly competitive and subject to rapid technological change, price
erosion and heightened international competition.
The communications IC markets are highly competitive and we expect that competition will increase in
these markets, due in part to deregulation and heightened international competition. Our ability to compete
successfully in our markets depends on a number of factors, including:
• success in designing and subcontracting the manufacture of new products that implement new
technologies;
• product quality, reliability and performance;
• customer support;
• time-to-market;
• price;
• production efficiency;
• design wins;
• expansion of production of our products for particular systems manufacturers;
• end-user acceptance of the systems manufacturers’ products;
• market acceptance of competitors’ products; and
• general economic conditions.
In addition, our competitors may offer enhancements to existing products, or offer new products based on
new technologies, industry standards or customer requirements, that are available to customers on a more timely
basis than comparable products from us or that have the potential to replace or provide lower cost alternatives to
our products. The introduction of such enhancements or new products by our competitors could render our
existing and future products obsolete or unmarketable. Furthermore, once a customer has designed a supplier’s
product into its system, the customer is extremely reluctant to change its supply source due to the significant
costs associated with qualifying a new supplier. Finally, we expect that certain of our competitors and other
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