AMD 1997 Annual Report Download - page 33

Order Revision and Cancellation Policies. AMD manufactures and markets
standard lines of products. Sales are made primarily pursuant to purchase
orders for current delivery, or agreements covering purchases over a period of
time, which are frequently subject to revision and cancellation without
penalty. As a result, AMD must commit resources to the production of products
without having received advance purchase commitments from customers. Any
inability to sell products to which it had devoted significant resources could
have a material adverse effect on the Company. Furthermore, the failure to
successfully ramp production to 0.25 micron process technology in Fab 25 and
to increase production levels could cause existing demand to abate from
current levels, which would have a material adverse effect on the Company.
Distributors typically maintain an inventory of the Company's products.
Pursuant to the Company's agreements with distributors, in most instances AMD
protects its distributors' inventory of the Company's products against price
reductions, as well as products that are slow moving or have been
discontinued. These agreements, which may be canceled by either party on a
specified notice, generally contain a provision for the return of the
Company's products in the event the agreement with the distributor is
terminated. The market for the Company's products is generally characterized
by, among other things, severe price competition. The price protection and
return rights AMD offers to its distributors could materially adversely affect
the Company if there is an unexpected significant decline in the price of the
Company's products.
Key Personnel. The Company's future success depends upon the continued
service of numerous key engineering, manufacturing, sales and executive
personnel. There can be no assurance that AMD will be able to continue to
attract and retain qualified personnel necessary for the development and
manufacture of its products. Loss of the service of, or failure to recruit,
key engineering design personnel could be significantly detrimental to the
Company's product development programs or otherwise have a material adverse
effect on the Company.
Intellectual Property Rights; Potential Litigation. Although the Company
attempts to protect its intellectual property rights through patents,
copyrights, trade secrets, trademarks and other measures, there can be no
assurance that the Company will be able to protect its technology or other
intellectual property adequately or that competitors will not be able to
develop similar technology independently. There can be no assurance that any
patent applications that the Company may file will be issued or that foreign
intellectual property laws will protect the Company's intellectual property
rights. There can be no assurance that any patent licensed by or issued to the
Company will not be challenged, invalidated or circumvented or that the rights
granted thereunder will provide competitive advantages to the Company.
Furthermore, there can be no assurance that others will not independently
develop similar products, duplicate the Company's products or design around
the Company's patents and other rights.
From time to time, AMD has been notified that it may be infringing
intellectual property rights of others. If any such claims are asserted
against the Company, the Company may seek to obtain a license under the third
party's intellectual property rights. AMD could decide, in the alternative, to
resort to litigation to challenge such claims. Such challenges could be
extremely expensive and time-consuming and could materially adversely affect
the Company. No assurance can be given that all necessary licenses can be
obtained on satisfactory terms, or that litigation may always be avoided or
successfully concluded.
Environmental Regulations. The failure to comply with present or future
governmental regulations related to the use, storage, handling, discharge or
disposal of toxic, volatile or otherwise hazardous chemicals used in the
manufacturing process could result in fines being imposed on the Company,
suspension of production, alteration of the Company's manufacturing processes
or cessation of operations. Such regulations could require the Company to
acquire expensive remediation equipment or to incur other expenses to comply
with environmental regulations. Any failure by the Company to control the use,
disposal or storage of, or adequately restrict the discharge of, hazardous
substances could subject the Company to future liabilities and could have a
material adverse effect on the Company.
International Sales. AMD derives a substantial portion of its revenues from
its sales subsidiaries located in Europe and Asia Pacific. The Company's
international sales operations entail political and economic risks,
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Source: ADVANCED MICRO DEVIC, 10-K405, March 03, 1998