AMD 2003 Annual Report Download - page 17

Table of Contents
microprocessors to OEMs, we depend on third-party companies other than Intel for the design and manufacture of core-logic chipsets, graphics chips,
motherboards, BIOS software and other components. In recent years, many of these third-party designers and manufacturers have lost significant market share to
Intel or exited the business. In addition, these companies produce chipsets, motherboards, BIOS software and other components to support each new generation
of Intel’s microprocessors, and Intel has significant leverage over their business opportunities.
We do not currently plan to develop microprocessors that are bus interface protocol compatible with Intel microprocessors 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,
our microprocessors are not designed to function with motherboards and chipsets designed to work with Intel microprocessors. Our ability to compete with Intel
in the market for microprocessors will depend on our ability to continue to develop relationships with infrastructure providers and ensure that these third-party
designers and manufacturers design PC platforms to support new generations of our microprocessors. A failure of the designers and producers of motherboards,
chipsets and other system components to support our microprocessor offerings, particularly our new AMD Athlon 64 and AMD Opteron processors, would have
a material adverse effect on us.
Similarly, we offer OEMs and partners motherboard reference design kits designed to support our processors. The primary reason we offer these products
is to provide our customers with a solution that will allow them to use our microprocessors and develop and introduce their products in the market more quickly.
We cannot be certain, however, that our efforts will be successful.
We expect Intel to maintain its dominant position in the microprocessor market and to continue to invest heavily in research and development, new
manufacturing facilities and other technology companies. Intel has substantially greater financial resources than we do and accordingly spends substantially
greater amounts on research and development than we do. We expect competition from Intel to increase in 2004 and beyond to the extent Intel reduces the prices
for its products and as Intel introduces new products. For example, in February 2004, Intel announced that it intends to introduce 64-bit processors for servers
and workstations that will be able to run existing 32-bit software applications in mid-2004. We believe that these processors will compete with our AMD Opteron
microprocessors. In addition, Intel announced that it will offer 64-bit processors for the desktop market and other market segments that will be able to run
existing 32-bit software applications in a time frame based on both timing and availability of the infrastructure required to support them, and customer demand.
These products would compete with our AMD Athlon 64 microprocessors. Moreover, Intel currently manufactures certain of its microprocessor products on
300-millimeter wafers using 90-nanometer process technology. Use of 90-nanometer technology can result in products that are higher performing, use less power
and that cost less to manufacture. Use of 300-millimeter wafers can decrease manufacturing costs and increase capacity by yielding more equivalent chips per
wafer than 200-millimeter wafers. We have not yet made comparable transitions at our microprocessor manufacturing facilities. As a result, we may be more
vulnerable to Intel’s aggressive pricing strategies for microprocessor products. Intel’s strong position in the microprocessor market, its existing relationships with
top-tier OEMs and its aggressive pricing strategies could result in lower unit sales and average selling prices for our products, which could adversely affect our
revenues.
Competition in the Flash Memory Market
With respect to Flash memory products, our principal competitors are Intel, Samsung, Toshiba, STMicroelectronics N.V., Sharp Electronics Corporation,
Renesas Technology, Silicon Storage Technology, and Macronix International. We expect competition in the market for Flash memory devices to increase in
2004 and beyond as existing manufacturers introduce new products and industry-wide production capacity increases. Furthermore, in 2003, NAND vendors
gained an increasing share of the overall Flash memory market. If further significant improvements in NAND technology occur in the future, applications
currently using NOR technology may transition to NAND technology. As a result, NAND vendors may gain a substantial share of the overall Flash memory
market.
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Source: ADVANCED MICRO DEVIC, 10-K, March 09, 2004