AMD 2001 Annual Report Download - page 220

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
we may underutilize our manufacturing facilities, and we could be materially
adversely affected. This has in the past had, and in the future may have, a
material adverse effect on our earnings.
We have also begun to convert our manufacturing facility in Austin, Texas (Fab
25) from production of microprocessors to production of our Flash memory
devices. At this time, the most significant risk is that we will have
underutilized capacity in Fab 25 as we continue to transition the production of
microprocessors out of Fab 25 and into Dresden Fab 30 and as we convert Fab 25
to a Flash memory device production facility while demand for flash memory
products remains depressed.
There may also be situations in which our manufacturing facilities are
inadequate to meet the demand for certain of our products. Our inability to
obtain sufficient manufacturing capacity to meet demand, either in our own
facilities or through foundry or similar arrangements with others, could have a
material adverse effect on us. Further, we cannot be certain that we will be
able to implement the process technology for the conversion of Fab 25 in a
timely manner. During this period of conversion, Fab 25 may not be fully
productive. Similarly, Dresden Fab 30 is expected to be fully facilitized by the
end of 2003. During this process, Dresden Fab 30 will not be fully productive. A
substantial delay in the successful conversion of Fab 25 or the facilitization
of Dresden Fab 30 could have a material adverse effect on us.
We Make Substantial Investments in Research and Development of Process
Technologies That May Not Be Successful. We make substantial investments in
research and development of process technologies in an effort to improve the
technologies and equipment used to fabricate our products. For example, the
successful development and implementation of silicon on insulator technology is
critical to the Hammer family of microprocessors currently under development.
However, we cannot be certain that we will be able to develop or obtain or
successfully implement leading-edge process technologies needed to fabricate
future generations of our products.
Any Substantial Interruption of or Problems with Our Manufacturing Operations
Could Materially Adversely Affect Us. Any substantial interruption of our
manufacturing operations, either as a result of a labor dispute, equipment
failure or other cause, could materially adversely affect us. Further,
manufacturing yields may be adversely affected by, among other things, errors
and interruptions in the fabrication process, defects in raw materials,
implementation of new manufacturing processes, equipment performance and process
controls. A decline in manufacturing yields may have a material adverse effect
on our earnings.
Our Products May not Be Compatible with Some or All Industry-Standard Software
and Hardware. It is possible that our products may not be compatible with some
or all industry-standard software and hardware. Further, we may be unsuccessful
in correcting any such compatibility problems in a timely manner. If our
customers are unable to achieve compatibility with software or hardware after
our products are shipped in volume, we could be materially adversely affected.
In addition, the mere announcement of an incompatibility problem relating to our
products could have a material adverse effect on us.
Costs Related to Defective Products Could Have a Material Adverse Effect on Us.
It is possible that one or more of our products may be found to be defective
after the product has been shipped to customers in volume. The cost of a recall,
software fix, product replacements and/or product returns may be substantial and
could have a material adverse effect on us. In addition, modifications needed to
fix the defect may impede performance of the product.
We Rely on the Availability of Essential Raw Materials to Manufacture Our
Products. Certain raw materials we use in the manufacture of our products are
available from a limited number of suppliers. Interruption of supply or
increased demand in the industry could cause shortages and price increases in
various essential materials. If we are unable to procure certain of
Source: ADVANCED MICRO DEVIC, 10-K, March 07, 2002