AMD 1998 Annual Report Download - page 227

new product introductions and enhancements, short product life cycles and severe
price competition. Currently accepted industry standards may change. Our success
depends substantially on our ability, on a cost-effective and timely basis, to
continue to enhance our existing products and to develop and introduce new
products that take advantage of technological advances and adhere to evolving
industry standards. An unexpected change in one or more of the technologies
related to our products, in market demand for products based on a particular
technology or of accepted industry standards could materially and adversely
affect our business. We may or may not be able to develop new products in a
timely and satisfactory manner to address new industry standards and
technological changes, or to respond to new product announcements by others. In
addition, new products may or may not achieve market acceptance.
Competition. The IC industry is intensely competitive and, historically, has
experienced rapid technological advances in product and system technologies.
After a product is introduced, prices normally decrease over time as production
efficiency and competition increase, and as successive generations of products
are developed and introduced for sale. Technological advances in the industry
result in frequent product introductions, regular price reductions, short
product life cycles and increased product capabilities that may result in
significant performance improvements. Competition in the sale of ICs is based
on:
. performance;
. product quality and reliability;
. price;
. adherence to industry standards;
. software and hardware compatibility;
. marketing and distribution capability;
. brand recognition;
. financial strength; and
. ability to deliver in large volumes on a timely basis.
Fluctuations in Operating Results. Our operating results are subject to
substantial quarterly and annual fluctuations due to a variety of factors,
including:
. the effects of competition with Intel in the microprocessor and Flash
memory device markets;
. competitive pricing pressures;
. anticipated decreases in unit average selling prices of our products;
. production capacity levels and fluctuations in manufacturing yields;
. availability and cost of products from our suppliers;
. the gain or loss of significant customers;
. new product introductions by us or our competitors;
. changes in the mix of products produced and sold and in the mix of sales
by distribution channels;
. market acceptance of new or enhanced versions of our products;
. seasonal customer demand due to vacation and holiday schedules (for
example, decreased demand in Europe during the summer); and
. the timing of significant orders and the timing and extent of product
development costs.
In addition, operating results have recently been, and may in the future be,
adversely affected by general economic and other conditions causing a downturn
in the market for semiconductor devices, or otherwise affecting the timing of
customer orders or causing order cancellations or rescheduling. Our customers
may change delivery schedules or cancel orders without significant penalty. Many
of the factors listed above are outside of our control. These factors are
difficult to forecast, and these or other factors could materially and adversely
affect our quarterly or annual operating results.
Order Revision and Cancellation Policies. We manufacture and market 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
may be revised or canceled without penalty. As a result, we must commit
resources to the production of products without any advance purchase commitments
from customers. Our inability to sell products after we devoted significant
resources to them could have a material adverse effect on our business.
Distributors typically maintain an inventory of our products. In most instances,
our agreements with distributors protect their inventory of our 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 allow for the return of our products if the
agreement with the distributor is terminated. The market for our products is
generally characterized by, among other things, severe price competition. The
price protection and return rights we offer to our distributors could
materially and adversely affect us if there is an unexpected significant decline
in the price of our products.
Key Personnel. Our future success depends upon the continued service of numerous
key engineering, manufacturing, sales and executive personnel. We may or may not
be able to continue to attract and retain qualified personnel necessary for the
development and manufacture of our products. Loss of the service of, or failure
to recruit,
22
Source: ADVANCED MICRO DEVIC, 10-K, March 29, 1999