AMD 2003 Annual Report Download - page 57

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cross-default under agreements covering other borrowings. For example, the occurrence of a default under the July 2003 FASL Term Loan would cause a
cross-default under the July 2003 Loan Agreement and a default under the July 2003 Loan Agreement or under the indentures governing our 4.75% Debentures
and our 4.50% Notes would cause a cross-default under the Dresden Loan Agreements. The occurrence of a default under any of these borrowing arrangements
would permit the applicable lenders or note holders to declare all amounts outstanding under those borrowing arrangements to be immediately due and payable
and would permit the lenders to terminate all commitments to extend further credit. If we or FASL LLC were unable to repay those amounts, the lenders under
the July 2003 Loan Agreement, the July 2003 FASL Term Loan Agreement and the Dresden Loan Agreements could proceed against the collateral granted to
them to secure that indebtedness. We have granted a security interest in substantially all of our inventory and accounts receivable under our July 2003 Loan
Agreement, FASL LLC has granted a security interest in certain property, plant and equipment as security under the July 2003 FASL Term Loan Agreement, and
AMD Saxony has pledged substantially all of its property as security under the Dresden Loan Agreements. If the lenders under any of the credit facilities or the
note holders or the trustee under the indentures governing our 4.75% Debentures and our 4.50% Notes accelerate the repayment of borrowings, we cannot assure
you that we will have sufficient assets to repay those borrowings and our other indebtedness.
Costs related to defective products could have a material adverse effect on us. 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.
If essential raw materials are not available to manufacture our products, we could be materially adversely affected. Certain raw materials we use in the
manufacture of our products and FASL LLC uses in the manufacture of its products are available from a limited number of suppliers. For example, we are
dependent on key chemicals from a limited number of suppliers and rely on a few foreign companies to supply the majority of certain types of integrated circuit
packages we purchase. Similarly, FASL LLC purchases commercial non-Flash memory die, such as SRAM, from third party suppliers and incorporates these die
into its MCP products. Interruption of supply or increased demand in the industry could cause shortages and price increases in various essential materials. If we
or FASL LLC are unable to procure certain of these materials, we or FASL LLC might have to reduce our manufacturing operations. Such a reduction could
have a material adverse effect on us.
Our operations in foreign countries are subject to political and economic risks, which could have a material adverse effect on us. Nearly all product
assembly and final testing of our microprocessor products are performed at our manufacturing facilities in Malaysia, and Singapore; or by subcontractors in the
United States and Asia. Nearly all product assembly and final testing of Spansion products are performed at FASL LLC’s facilities in Malaysia, Thailand, and
China. We manufacture our microprocessors in Germany. We also depend on foreign foundry suppliers for the production of our Personal Connectivity Solutions
and chipset products, international joint ventures for the manufacture of optical photomasks that we intend to use in the manufacture of our microprocessors, and
we have international sales operations.
The political and economic risks associated with our operations in foreign countries include:
• expropriation;
• changes in a specific country’s or region’s political or economic conditions;
• trade protection measures and import or export licensing requirements;
• difficulty in protecting our intellectual property;
• changes in foreign currency exchange rates and currency controls;
• 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;
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Source: ADVANCED MICRO DEVIC, 10-K, March 09, 2004