AMD 1999 Annual Report Download - page 12

20 percent of net sales in 1997. Our research and development expenses are
charged to operations as they are incurred. Most of our research and
development personnel are integrated into the engineering staff.
Manufacturing technology is the key determinant in the improvement in most
semiconductor products. Each new generation of process technology has resulted
in products with higher speeds and greater performance produced at lower cost.
We continue to make significant infrastructure investments to enable us to
continue to achieve high volume, high reliability and low cost production
using leading edge process technology.
Our efforts concerning process technologies are focused in two major areas:
logic technology used by our microprocessors and embedded processors, and non-
volatile memory technology used by Flash memory products. Our goals are to
improve product performance, increase manufacturing volumes and reduce unit
costs.
In order to remain competitive, we must continue to make 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 in the fabrication of our microprocessor
products and in the fabrication of Flash memory devices. If we are not
successful in our microprocessor and Flash memory businesses, we will be
unable to recover such investments, which would have a material adverse effect
on our business. In addition, if we are unable to remain competitive with
respect to process technology we will be materially and adversely affected.
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.
In each market in which we participate, we face competition from different
groups of companies. With respect to microprocessors, Intel holds a dominant
market position. With respect to the Memory Group, our principal competitors
are Intel, Sharp, Atmel and ST Microelectronics. We also compete to a lesser
degree with Fujitsu, our joint venture partner in FASL. With respect to the
Communications Group product lines, our principal competitors are Broadcom
Corp., ST Microelectronics, Texas Instruments Incorporated, Infineon
Corporation, NEC Corporation, LM Ericsson, Alcatel, National Semiconductor
Corporation, 3Com Corporation, Intel Corporation, Lucent Technologies Inc.,
Conexant Systems, Inc. and Motorola, Inc.
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Source: ADVANCED MICRO DEVIC, 10-K405, March 21, 2000