AMD 2004 Annual Report Download - page 61

Table of Contents
The semiconductor industry is highly cyclical and has experienced severe downturns that materially adversely affected, and may in the future materially
adversely affect, our business.
The semiconductor industry is highly cyclical and has experienced significant downturns, often in connection with maturing product cycles, manufacturing
overcapacity and declines in general economic conditions. Our historical financial results have also been subject to substantial fluctuations. Our financial
performance has been, and may in the future be, negatively affected by these downturns. We incurred substantial losses in recent downturns, due to:
• the cyclical nature of supply/demand imbalances in the semiconductor industry;
• a decline in demand for end-user products that incorporate our semiconductors;
• excess inventory levels in the channels of distribution, including our customers;
• excess production capacity; and
• accelerated declines in average selling prices.
For example, in 2001 and 2002, we implemented restructuring plans due to weak customer demand associated with the downturn in the semiconductor
industry. Similarly, in the fourth quarter of 2004, the downturn in the Flash memory market contributed to a decline in our Memory Product net sales. If these
conditions in the semiconductor industry occur, we could be materially adversely affected.
Fluctuations in demand for PCs and mobile telephones and other consumer electronics may adversely affect sales of our products.
The Computation Products segment of our business is dependent upon the market for computers, including PCs. Industry-wide fluctuations in the
computer marketplace have materially adversely affected us in the past and may materially adversely affect us in the future. Depending on the growth rate of
computers sold, sales of our microprocessors may not grow and may even decrease. If end-user demand for computers is below our expectations, we could be
materially adversely affected. In addition, potential market share increases by customers who exclusively purchase microprocessors from Intel Corporation, such
as Dell, Inc., could further materially adversely affect us.
The Memory Products segment of our business is dependent to a large degree upon demand for mobile telephones as well as consumer electronics,
automotive electronics and other embedded applications. If demand for these devices is below our expectations or if the manufacturers of successive generations
of these devices do not require NOR-based Flash memory products or increasing Flash memory content, we could be materially adversely affected.
Intense competition in the microprocessor and Flash memory markets could materially adversely affect us.
The IC industry is intensely competitive. With respect to our microprocessor products, our competitor is Intel. Microprocessor products compete on
performance, quality, reliability, price, adherence to industry standards, software and hardware compatibility, marketing and distribution capability, brand
recognition and availability. After a product is introduced, costs and average selling prices normally decrease over time as production efficiency improves, and
successive generations of products are developed and introduced for sale. We may not be able to compete effectively if we fail to reduce our costs on existing
products or fail to develop and introduce, on a cost-effective and timely basis, new products or enhanced versions of existing products with higher margins.
Our principal competitors in the Flash memory market are Intel, Samsung, Toshiba, STMicroelectronics N.V., Sharp Electronics Corporation, Silicon
Storage Technology and Macronix International. The Flash memory market is characterized by migration to higher density and lower cost devices and a
competitive pricing
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Source: ADVANCED MICRO DEVIC, 10-K, March 01, 2005