AMD 2002 Annual Report Download - page 42

Table of Contents
Our memory products are based on the NOR architecture and a significant market shift to the NAND architecture could materially adversely affect
us. Our memory products are based on the NOR architecture, and any significant shift in the marketplace to products based on the NAND architecture will
reduce the total market available to us and therefore reduce our market share, which could have a materially adverse affect on us.
Worldwide economic and political conditions may affect demand for our products and slow payment by our customers. The economic slowdown in the
United States and worldwide, exacerbated by the occurrence and threat of terrorist attacks and consequences of sustained military action, has adversely affected
demand for our microprocessors, Flash memory devices and other integrated circuits. A continued decline of the worldwide semiconductor market or a
significant decline in economic conditions in any significant geographic area would likely decrease the overall demand for our products, which could have a
material adverse effect on us. If the economic slowdown continues or worsens as a result of terrorist activities, military action or otherwise, it could adversely
impact our customers’ ability to pay us in a timely manner.
Manufacturing capacity utilization rates may adversely affect us. At times we underutilize our manufacturing facilities as a result of reduced demand for
certain of our products. We are substantially increasing our manufacturing capacity by making significant capital investments in Fab 30, Fab 25, FASL JV3 and
our test and assembly facility in Suzhou, China. If the increase in demand for our products is not consistent with our expectations, 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 and cash flow.
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, during periods when we are implementing new process technologies, our manufacturing facilities may not be fully productive. A substantial delay
in the technology transitions in Fab 30 to smaller than 130 nanometer process technologies employing silicon-on-insulator technology could have a material
adverse effect on us.
At this time, the most significant risk is underutilization of our manufacturing capacity.
Unless we maintain manufacturing efficiency, our future profitability could be materially adversely affected. Manufacturing semiconductor components
involves highly complex processes that require advanced equipment. We and our competitors continuously modify these processes in an effort to improve yields
and product performance. Impurities or other difficulties in the manufacturing process can lower yields. Our manufacturing efficiency will be an important factor
in our future profitability, and we cannot be sure that we will be able to maintain our manufacturing efficiency or increase manufacturing efficiency to the same
extent as our competitors.
From time to time, we have experienced difficulty in beginning production at new facilities, transferring production to other facilities, and in effecting
transitions to new manufacturing processes that have caused us to suffer delays in product deliveries or reduced yields. We cannot be sure that we will not
experience manufacturing problems in achieving acceptable yields or product delivery delays in the future as a result of, among other things, capacity constraints,
construction delays, transferring production to other facilities, upgrading or expanding existing facilities or changing our process technologies, which could result
in a loss of future revenues. Our results of operations could also be adversely affected by the increase in fixed costs and operating expenses related to increases in
production capacity if revenues do not increase proportionately.
We cannot be certain that our substantial investments in research and development of process technologies will lead to improvements in technology and
equipment used to fabricate our products or that we will have sufficient resources to invest in the level of research and development that is required to remain
competitive. We make substantial investments in research and development of process technologies in an effort
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Source: ADVANCED MICRO DEVIC, 10-K, March 14, 2003