3Ware 2003 Annual Report Download - page 42

as a result of decreases in manufacturing yields. We may suffer periodic yield problems in connection with new
or existing products or in connection with the commencement of production at a new manufacturing facility.
We may experience difficulties in transitioning to smaller geometry process technologies or in achieving
higher levels of design integration and that may result in reduced manufacturing yields, delays in product
deliveries and increased expenses.
In order to remain competitive, we expect to continue to transition our products to increasingly smaller line
width geometries. This transition will require us to migrate to new manufacturing processes for our products and
redesign certain products. We periodically evaluate the benefits, on a product-by-product basis, of migrating to
smaller geometry process technologies to reduce our costs and increase performance, and we have designed
products to be manufactured at as little as .13 micron geometry processes. In the past, we have experienced some
difficulties in shifting to smaller geometry process technologies or new manufacturing processes. These
difficulties resulted in reduced manufacturing yields, delays in product deliveries and increased expenses. We
may face similar difficulties, delays and expenses as we continue to transition our products to smaller geometry
processes. We are dependent on our relationships with our foundries to transition to smaller geometry processes
successfully. We cannot assure you that our foundries will be able to effectively manage the transition or that we
will be able to maintain our relationships with our foundries. If we or our foundries experience significant delays
in this transition or fail to implement this transition, our business, financial condition and results of operations
could be materially and adversely affected. As smaller geometry processes become more prevalent, we expect to
continue to integrate greater levels of functionality into our products. However, we may not be able to achieve
higher levels of design integration or deliver new integrated products on a timely basis.
We must develop or otherwise gain access to improved process technologies.
Our future success will depend upon our ability to improve existing process technologies or acquire new
process technologies. In the future, we may be required to transition one or more of our products to process
technologies with smaller geometries, other materials or higher speeds in order to reduce costs or improve
product performance. We may not be able to improve our process technologies or otherwise gain access to new
process technologies in a timely or affordable manner. Products based on these technologies may not achieve
market acceptance.
The complexity of our products may lead to errors, defects and bugs when they are first introduced, which
could negatively impact our reputation with customers.
Products as complex as ours may contain errors, defects and bugs when first introduced or as new versions
are released. Our products have in the past experienced such errors, defects and bugs. Delivery of products with
production defects or reliability, quality or compatibility problems could significantly delay or hinder market
acceptance of the products or result in a costly recall. This, in turn, could damage our reputation and adversely
affect our ability to retain existing customers and to attract new customers. Errors, defects or bugs could cause
problems, interruptions, delays or cessation of sales to our customers.
We may also be required to make significant expenditures of capital and resources to resolve such problems.
There can be no assurance that problems will not be found in new products after commencement of commercial
production, despite testing by us, our suppliers or our customers. This could result in:
• additional development costs;
• loss of, or delays in, market acceptance;
• diversion of technical and other resources from our other development efforts;
• claims by our customers or others against us; and
37