AMD 2003 Annual Report Download - page 53

Table of Contents
extent Intel reduces prices for its products and as Intel introduces new competitive 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.
If we are unable to develop, produce and successfully market higher-performing microprocessor products, we may be materially adversely affected. The
microprocessor market is characterized by short product life cycles and migration to ever-higher performance microprocessors. To compete successfully, we
must transition to new process technologies at a fast pace and offer higher-performance microprocessors in significantly greater volumes at competitive prices. If
we fail to achieve yield and volume goals or to offer higher-performance microprocessors in significant volume on a timely basis and at competitive prices, we
could be materially adversely affected.
To be successful, we must increase sales of our x86 microprocessor products to existing customers and develop new customers in both consumer and
commercial markets, particularly the latter. Our production and sales plans for microprocessors are subject to other risks and uncertainties, including:
• market acceptance for the AMD Opteron and AMD Athlon 64 microprocessors, which rely on market acceptance and demand for our AMD64
technology;
• our ability to fund our planned 300-millimeter wafer fabrication facility and develop associated process technologies that will be required for long-term
competitiveness;
• our ability to increase our share of the enterprise market with tier-one OEM customers in order to have the demand necessary to utilize the capacity of
our planned 300-millimeter wafer fabrication facility;
• our ability to successfully market the AMD Athlon XP, AMD Opteron, AMD Athlon 64 and AMD Duron processors, which rely in part on market
acceptance of a metric based on overall processor performance versus processor clock speed (measured in megahertz frequency);
• the pace at which we expect to be able to convert production in Fab 30 to 90-nanometer process technology;
• our ability to maintain adequate selling prices of microprocessors despite increasingly aggressive Intel pricing strategies, marketing programs, new
product introductions and product bundlings of microprocessors, motherboards and chipsets;
• our ability, on a timely basis, to produce microprocessors in the volume and with the performance and feature set required by customers;
• our ability to attract and retain engineering and design talent;
• our ability to expand system design capabilities; and
• the availability and acceptance of motherboards and chipsets designed for our microprocessors.
48
Source: ADVANCED MICRO DEVIC, 10-K, March 09, 2004