AMD 2000 Annual Report Download - page 17

Motorola. In 1998, we entered into an alliance with Motorola for the
development of logic and Flash memory process technology. The alliance includes
a seven-year technology development and license agreement, which was amended on
January 21, 2000 to include certain additional technology, and a patent cross-
license agreement. The agreements provide that we will co-develop with Motorola
future generation logic process and embedded Flash technologies. In addition, we
have received certain licenses to Motorola's semiconductor logic process
technologies, including copper interconnect technology, which may be subject to
variable royalty rates. In exchange, we have developed and licensed to Motorola
a Flash module design to be used in Motorola's future embedded Flash products.
Motorola will have additional rights, subject to certain conditions, to make
stand-alone Flash devices, and to make and sell certain data networking devices.
The rights to data networking devices may be subject to variable royalty payment
provisions.
Marketing and Sales
Our products are marketed and sold under the AMD trademark. We employ a
direct sales force through our principal facilities in Sunnyvale, California,
and field sales offices throughout the United States and abroad (primarily
Europe and Asia Pacific). We also sell our products through third-party
distributors and independent representatives in both domestic and international
markets pursuant to nonexclusive agreements. The distributors also sell products
manufactured by our competitors, including those products for which we are an
alternate source. One of our OEMs, Compaq Computer Corporation, accounted for
approximately 11 percent of our 2000 net sales. No other single distributor or
OEM customer accounted for ten percent or more of our net sales in 2000.
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.
Our international sales operations entail political and economic risks,
including expropriation, currency controls, exchange rate fluctuations, changes
in freight rates and changes in rates and exemptions for taxes and tariffs.
Raw Materials
Certain raw materials we use in the manufacture of our products are
available from a limited number of suppliers. For example, we are dependent on
key chemicals from a limited number of suppliers, and a few foreign companies
principally supply several types of the IC packages purchased by us.
Interruption of supply, increased demand in the industry or currency
fluctuations 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. To date, we have not experienced
significant difficulty in obtaining the raw materials required for our
manufacturing operations.
Environmental Regulations
We could possibly be subject to fines, suspension of production, alteration
of our manufacturing processes or cessation of our operations if we fail to
comply with present or future governmental regulations related to the use,
storage, handling, discharge or disposal of toxic, volatile or otherwise
hazardous chemicals used in our manufacturing processes. Such regulations could
require us to acquire expensive remediation equipment or to incur other expenses
to comply with environmental regulations. Any failure to control the use,
disposal or storage of, or adequately restrict the discharge of, hazardous
substances could subject us to future liabilities and could have a material
adverse effect on our business.
Intellectual Property and Licensing
We have been granted over 3,700 United States patents, and have several
thousand patent applications pending in the United States. In certain cases, we
have filed corresponding applications in foreign jurisdictions. We expect to
file future patent applications in both the United States and abroad on
significant inventions as we deem appropriate.
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Source: ADVANCED MICRO DEVIC, 10-K405, March 20, 2001