AMD 2004 Annual Report Download - page 15

Table of Contents
• control over industry standards, PC manufacturers and other PC industry participants, including motherboard, memory, chipset and basic input/output
system, or BIOS, suppliers; and
• strong brand, and marketing and advertising expenditures in support of the brand.
Intel also dominates the PC system platform, which includes core logic chipsets, graphics chips, motherboards and other components necessary to
assemble a PC system. 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. Additionally, Intel is able to drive de facto standards for x86 microprocessors that could cause us and other companies to have delayed access to such
standards. In marketing our 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, Intel has significant leverage over these companies because they support each new generation
of Intel’s microprocessors.
Currently, we do not 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 Intel’s proprietary bus interface protocol. 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
continued success in developing and maintaining relationships with infrastructure providers in order to ensure that these third-party designers and manufacturers
of motherboards, chipsets and other system components support our microprocessor offerings, particularly our AMD64-based microprocessors.
Similarly, we offer OEMs and other companies 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 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 and production capacity than we do. We expect competition from Intel to continue and increase in the future to the
extent Intel reduces the prices for its products and as Intel introduces new competitive products. For example, in 2004, Intel introduced a 64-bit processor for
servers and workstations that runs existing 32-bit software applications. These processors compete with our AMD Opteron microprocessors. In addition, Intel
recently announced that it will offer dual-core 64-bit processors for the desktop market in the second quarter of 2005. Moreover, Intel currently manufactures
certain of its microprocessor products on 300-millimeter wafers using 90-nanometer process technology, which can result in products that are higher performing,
use less power and cost less to manufacture. We are currently transitioning to 90-nanometer process technology for microprocessor manufacturing, and we
expect to transition to using 300-millimeter wafers in 2006.
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,
Silicon Storage Technology, and Macronix International. Most of these competitors market devices incorporating multi-level-cell floating gate technology that
store fractional charge levels within a single cell thereby permitting the storage of two bits per cell. We believe many of our other competitors plan to develop
multi-level-cell technology.
We expect competition in the market for Flash memory devices to increase as existing manufacturers introduce new products, new manufacturers enter the
market, industry-wide production capacity increases and competitors aggressively price their Flash memory products to increase market share. In addition, we
and certain of our competitors have licensed non-volatile memory technology called NROM technology from a third party.
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Source: ADVANCED MICRO DEVIC, 10-K, March 01, 2005