AMD 1999 Annual Report Download - page 136

We expect Intel to continue to invest heavily in research and development, new
manufacturing facilities and other technology companies, and to remain dominant:
. through the Intel Inside and other marketing programs;
. through other contractual constraints on customers, retailers, industry
suppliers and other third parties;
. by controlling industry standards; and
. by controlling supply and demand of motherboards, chipsets and other system
components.
As an extension of its dominant microprocessor market share, Intel also
dominates the PC platform. As a result, it is difficult for PC manufacturers to
innovate and differentiate their product offerings. We do not have the financial
resources to compete with Intel on such a large scale. As long as Intel remains
in this dominant position, we may be materially and adversely affected by its:
. product mix and introduction schedules;
. product bundling and pricing strategies;
. control over industry standards, PC manufacturers and other PC industry
participants, including motherboard, chipset and BIOS suppliers; and
. customer brand loyalty.
As Intel expanded its dominance over the PC system platform, many PC
manufacturers reduced their system development expenditures and now purchase
microprocessors together with chipsets or in assembled motherboards. PC OEMs are
increasingly dependent on Intel, less innovative on their own and, to a large
extent, distributors of Intel technology. In marketing our microprocessors to
these OEMs and dealers, we depend on companies other than Intel for the design
and manufacture of core-logic chipsets, motherboards, basic input/output system
(BIOS) software and other components. In recent years, many of these third-party
designers and manufacturers have lost significant market share to Intel. In
addition, these companies produce chipsets, motherboards, BIOS software and
other components to support each new generation of Intel's microprocessors only
if Intel makes information about its products available to them in time to
address market opportunities. Delay in the availability of such information
makes, and will continue to make, it increasingly difficult for these third
parties to retain or regain market share.
To compete with Intel in the microprocessor market in the future, we intend to
continue to form closer relationships with third-party designers and
manufacturers of chipsets, motherboards, BIOS software and other components.
Similarly, we intend to expand our chipset and system design capabilities, and
to offer OEMs licensed system designs incorporating our microprocessors and
companion products. We cannot be certain, however, that our efforts will be
successful. We expect that, as Intel introduces future generations of
microprocessors, chipsets and motherboards, the design of chipsets, memory and
other semiconductor devices, and higher level board products which support Intel
microprocessors, will become increasingly dependent on the Intel microprocessor
design and may become incompatible with non-Intel processor-based PC systems.
Intel's Pentium(R) III and Celeron(TM) microprocessors are sold only in form
factors that are not physically or interface protocol compatible with "Socket 7"
motherboards currently used with AMD-K6 microprocessors. Thus, Intel no longer
supports the Socket 7 infrastructure as it did when it was selling its fifth-
generation Pentium processors. Because AMD-K6 microprocessors are designed to be
Socket 7 compatible, and will not work with motherboards designed for Pentium
II, III and Celeron processors, we intend to continue to work with third-party
designers and manufacturers of motherboards, chipsets and other products to
ensure the continued availability of Socket 7 infrastructure support for AMD-K6
microprocessors, including support for enhancements and features we add to our
microprocessors. Socket 7 infrastructure support for AMD-K6 microprocessors may
not endure over time as Intel moves the market to its infrastructure choices.
We do not currently plan to develop microprocessors that are bus interface
protocol compatible with the Pentium III and Celeron processors because our
patent cross-license agreement with Intel does not extend to microprocessors
that are bus interface protocol compatible with Intel's sixth and subsequent
generation processors. Thus, the AMD Athlon microprocessor is not designed to
function with motherboards and chipsets designed to work with Intel
microprocessors. Our ability to compete with Intel in the market for AMD Athlon
seventh-generation and future generation microprocessors will depend on our:
. success in designing and developing the microprocessors; and
. 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, processor modules and other system components to support our K86
microprocessor offerings would have a material adverse effect on our business.
Source: ADVANCED MICRO DEVIC, 10-K405, March 21, 2000