AMD 2003 Annual Report Download - page 16

Table of Contents
• trade protection measures and import or export licensing requirements;
• difficulty in protecting our intellectual property;
• changes in foreign currency exchange rates and currency controls, which may impact, among other things our gross margins;
• changes in freight and interest rates;
• disruption in air transportation between the United States and our overseas facilities; and
• loss or modification of exemptions for taxes and tariffs.
In 2004, we plan to make additional capital investments in our assembly and test facilities.
Certain Material Agreements. Descriptions of certain material contractual relationships we have relating to FASL LLC are set forth on page 2, above,
and page 14, below, and relating to Fab 30 are set forth on page 34, below. A description of our principal contractual relationships with IBM is set forth on page
9, above.
Competition
The integrated circuit industry is intensely competitive. Products compete on performance, quality, reliability, price, adherence to industry standards,
software and hardware compatibility, marketing and distribution capability, brand recognition and availability. 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.
In each area of the digital integrated circuit markets in which we participate, we face competition from different companies.
Competition in the Microprocessor Market
Intel has dominated the market for microprocessors used in desktop and mobile PCs for many years. Intel is also a significant competitor in the server
segment of the microprocessor market. Because of its dominant position, Intel has also been able to control x86 microprocessor and PC system standards and
dictate the type of products the microprocessor market requires of Intel’s competitors. In addition, Intel’s significant financial resources allow it to market its
products aggressively, to target our customers and our channel partners with special incentives, and to discipline customers who do business with us. These
aggressive activities can result in lower unit sales and average selling prices for us and adversely affect our margins and profitability. Intel also exerts substantial
influence over PC manufacturers and their channels of distribution through the “Intel Inside” brand program and other marketing programs. As long as Intel
remains in this dominant position, we may be materially and adversely affected by its:
• pricing and allocation strategies and actions;
• product mix and introduction schedules;
• product bundling, marketing and merchandising strategies;
• exclusivity payments to its current and potential customers;
• control over industry standards, PC manufacturers and other PC industry participants, including motherboard, chipset and basic input/output system, or
BIOS, suppliers; and
• user brand loyalty.
Intel also dominates the PC system platform. As a result, PC OEMs are highly dependent on Intel, less innovative on their own and, to a large extent, are
distributors of Intel technology. In marketing our
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Source: ADVANCED MICRO DEVIC, 10-K, March 09, 2004