AMD 1998 Annual Report Download - page 223

Process Technology. In order to remain competitive, we must make continuing
substantial investments in improving our process technologies. In particular, we
have made and continue to make significant research and development investments
in the technologies and equipment used to fabricate our microprocessor products
and our Flash memory devices. Portions of these investments might not be fully
recovered if we fail to continue to gain market acceptance or if the market for
our Flash memory products should significantly deteriorate. Likewise, we are
making a substantial investment in Dresden Fab 30. The business plan for Dresden
Fab 30 calls for the successful development and installation of 0.18-micron
process technology and copper interconnect technology in order to manufacture
the AMD-K7 microprocessor in Dresden Fab 30 beginning in late 1999. We have
entered into a strategic alliance with Motorola to co-develop the copper
interconnect technology required for the AMD-K7 and subsequent generations of
microprocessors. We cannot be certain that the strategic alliance will be
successful or that we will be able to develop or obtain the leading-edge process
technologies that will be required in Dresden Fab 30 to fabricate the AMD-K7
microprocessor successfully.
Manufacturing Interruptions and Yields. Any substantial interruption of our
manufacturing operations, either as a result of a labor dispute, equipment
failure or other cause, could materially and adversely affect our business
operations. For example, our results in the past have been negatively affected
by disappointing AMD-K6 microprocessor yields. We may in the future be
materially and adversely affected by fluctuations in manufacturing yields. The
manufacture of ICs is a complex process. Normal manufacturing risks include
errors and interruptions in the fabrication process and defects in raw
materials, as well as other risks, all of which can affect yields. Additional
manufacturing risks incurred in ramping up new fabrication areas and/or new
manufacturing processes include equipment performance and process controls as
well as other risks, all of which can affect yields.
Product Incompatibility. Our products may possibly be incompatible with some or
all industry-standard software and hardware. If our customers are unable to
achieve compatibility with software or hardware after our products are shipped
in volume, we could be materially and adversely affected. It is also possible
that we may be unsuccessful in correcting any such compatibility problems that
are discovered or that corrections will be unacceptable to customers or made in
an untimely manner. In addition, the mere announcement of an incompatibility
problem relating to our products could have a material adverse effect on our
business.
Product Defects. One or more of our products may possibly be found to be
defective after we have already shipped such products in volume, requiring a
product replacement, recall, or a software fix which would cure such defect but
impede performance. We may also be subject to product returns which could impose
substantial costs on us and have a material adverse effect on our business.
Essential Manufacturing Materials. Certain raw materials we use in the
manufacture of our products are available from a limited number of suppliers.
For example, a few foreign companies principally supply several types of the IC
packages purchased by us, as well as by the majority of other companies in the
semiconductor industry. Interruption of supply or increased demand in the
industry could cause shortages in various essential materials. We would have to
reduce our manufacturing operations if we were unable to procure certain of
these materials. This reduction in our manufacturing operations could have a
material adverse effect on our business.
International Manufacturing and Foundries. Nearly all product assembly and final
testing of our products are performed at our manufacturing facilities in Penang,
Malaysia; Bangkok, Thailand; and Singapore; or by subcontractors in Asia. We
have also constructed an additional assembly and test facility in Suzhou, China.
We also depend on foreign foundry suppliers and joint ventures for the
manufacture of a portion of our finished silicon wafers. Foreign manufacturing
and construction of foreign facilities entail political and economic risks,
including political instability, expropriation, currency controls and
fluctuations, changes in freight and interest rates, and loss or modification of
exemptions for taxes and tariffs. For example, if we were unable to assemble and
test our products abroad, or if air transportation between the United States and
our overseas facilities were disrupted, there could be a material adverse effect
on our business.
Impact of Year 2000
General. The Year 2000 issue is the result of computer software and firmware
being written using two digits rather than four to define the applicable year.
If our computer software and firmware with date-sensitive functions are not Year
2000 capable, they may recognize a date using "00" as the year 1900 rather than
the year 2000. This could result in a system failure or miscalculations causing
disruptions of operations, including, among other things, interruptions in
manufacturing operations
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Source: ADVANCED MICRO DEVIC, 10-K, March 29, 1999