AMD 1998 Annual Report Download - page 221

. ability to ensure that the microprocessors can be used in PC platforms
designed to support Intel's microprocessors and our microprocessors, or
that alternative platforms are available which are competitive with those
used with Intel processors.
A failure for any reason of the designers and producers of motherboards,
chipsets and other system components to support our x86 microprocessor offerings
would have a material adverse effect on our business.
Dependence on Microsoft and Logo License. Our ability to innovate beyond the x86
instruction set controlled by Intel depends on support from Microsoft in its
operating systems. If Microsoft does not provide support in its operating
systems for the x86 instructions that we innovate and design into our
processors, independent software providers may forego designing their software
applications to take advantage of our innovations. This would adversely affect
our ability to market our processors. In addition, we have entered into logo
license agreements with Microsoft that allow us to label our products as
"Designed for Microsoft Windows." We have also obtained appropriate
certifications from recognized testing organizations for our K86
microprocessors. If we fail to maintain the logo license agreements with
Microsoft, we may lose our ability to label our K86 microprocessors with the
Microsoft Windows logo. This could impair our ability to market the products and
could have a material adverse effect on our business.
Future Dependence on Planned AMD-K7 Microprocessor. We will need to successfully
develop and market in a timely manner our seventh-generation microprocessor, the
AMD-K7, in order to increase our microprocessor product revenues in 1999 and
beyond, and to benefit fully from the substantial financial investments and
commitments we have made and continue to make related to microprocessors. We
currently plan to introduce the AMD-K7 microprocessor by the end of the first
half of 1999. We cannot be certain that the introduction will occur on schedule.
Our production and sales plans for the AMD-K7 are subject to numerous risks and
uncertainties, including:
. the successful development and installation of 0.18-micron process
technology and copper interconnect technology;
. the pace at which we are able to transition production in Fab 25 from
0.25- to 0.18-micron process technology and to ramp production in Dresden
Fab 30 on 0.18-micron copper interconnect process technology;
. the use and market acceptance of a non-Intel processor bus (adapted by us
from Digital Equipment Corporation's EV6 pin bus) in the design of the
AMD-K7, and the availability of chipset vendors who will develop,
manufacture and sell chipsets with the EV6 interface in volumes required
by us;
. our ability to expand our chipset and system design capabilities;
. the availability to our customers of cost and performance competitive
Static Random Access Memories (SRAMs), including TAG chips, if Intel
corners the market for SRAM production capacity through its relationship
with SRAM manufacturers;
. our ability to design and manufacture processor
modules through subcontractors; and
. the availability and acceptance of motherboards designed for the AMD-K7
microprocessor.
If we fail to introduce the AMD-K7 microprocessor in a timely manner or achieve
market acceptance, our business will be materially and adversely affected.
Possible Rights of Others. Prior to our acquisition of NexGen, NexGen granted
limited manufacturing rights regarding certain of its current and future
microprocessors, including the Nx586(TM) and Nx686(TM) to other companies. We do
not intend to produce any NexGen products. We believe that our AMD-K6
microprocessors are AMD products and not NexGen products because, among other
things, we significantly modified the technology we acquired in the NexGen
merger using our design, verification and manufacturing technologies. No NexGen
licensee or other party has asserted any rights with respect to the AMD-K6
family of microprocessors. However, it is possible that another company may seek
to establish rights with respect to the microprocessors. If another company were
deemed to have rights to produce any of our AMD-K6 family of microprocessors for
its own use or for sale to third parties, such production could reduce the
potential market for our microprocessor products, the profit margin achievable
with respect to such products, or both.
Financing Requirements
We plan to continue to make significant capital investments in 1999. These
investments include those relating to the construction and facilitization of
Dresden Fab 30 and the continued facilitization of Fab 25.
In 1998, equipment was installed and production was initiated in FASL II. We
expect the facility, including equipment, to cost approximately $1 billion when
fully equipped. Capital expenditures for FASL II construction
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Source: ADVANCED MICRO DEVIC, 10-K, March 29, 1999