AMD 2004 Annual Report Download - page 64

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example, during the second half of 2004 we experienced a delay in qualifying a new Spansion Flash memory product for the wireless segment. This delay
contributed to lower than anticipated Flash memory product revenues for the quarter ended December 26, 2004. Qualifying this product in accordance with our
specifications and our revised schedule is critical to our ability to increase sales of our Memory Products segment.
In addition, we plan to introduce our dual-core microprocessors for servers and workstations in mid-2005, followed by dual-processors for the PC market
in the second half of 2005. If we are not able to introduce dual-core processors on a timely basis or if our dual-core processors do not achieve market acceptance,
we will be materially adversely affected.
A lack of market acceptance of MirrorBit technology could have a material adverse effect on us.
We believe that market acceptance of MirrorBit technology is a critical factor impacting our ability to increase Flash memory product revenues and market
share and decrease the cost of products in our Memory Products segment. MirrorBit technology is a memory cell architecture that enables Flash memory
products to store two bits of data in a single memory cell thereby doubling the density or storage capacity of each memory cell. A lack of continued market
acceptance of MirrorBit technology, adoption of such technology at a slower rate than we anticipate, or any substantial difficulty in transitioning Flash memory
products, including those based on MirrorBit technology, to any future process technology could reduce our ability to be competitive in the market.
Spansion Flash memory products are based on NOR architecture, and a significant market shift to NAND architecture could materially adversely affect us.
Flash memory products are generally based on either NOR architecture or NAND architecture. NAND has historically been the preferred architecture for
data storage because of attributes such as high densities and fast write and erase speeds. NOR has been the preferred architecture for code storage because of its
fast read performance and superior reliability. To date, our Flash memory products have been based on NOR architecture, and we do not manufacture products
based on NAND architecture.
During 2003 and 2004, industry sales of products based on NAND architecture grew at higher rates than sales of NOR-based products. This resulted in
NAND vendors gaining a greater share of the overall Flash memory market. As mobile telephones and other consumer-driven applications become more
advanced they will require higher density Flash memory to meet increased data storage requirements. Because storage requirements will increase to
accommodate data-intensive applications, customers may increasingly choose NAND-based products. Any significant shift in the marketplace to products based
on NAND architecture or other architectures may reduce the total market available to us and therefore reduce our revenues and market share.
We intend to address end markets traditionally served by NAND-based products with products based on our ORNAND architecture. We are currently
developing these products and if they, or any future products based on our MirrorBit technology and ORNAND architecture, fail to achieve acceptance in
markets traditionally served by NAND architecture, or at all, we could be materially adversely affected.
We are required to reach agreement with Fujitsu regarding certain actions of our majority-owned subsidiary, Spansion, and our interests may not be
aligned.
We own 60 percent of the equity interest in Spansion while Fujitsu owns the remaining 40 percent. Although we are entitled to appoint a majority of the
board of managers, which generally manages the affairs of Spansion, certain actions by Spansion require Fujitsu’s consent for as long as Fujitsu maintains
specific levels of equity ownership in Spansion. In addition, based upon designated thresholds of Fujitsu’s percentage interest in Spansion, certain actions require
the affirmative vote of at least a majority of the managers appointed by Fujitsu. These actions, which primarily represent protective rights for Fujitsu as a
minority member, include:
• major investments, acquisitions and dispositions of assets;
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Source: ADVANCED MICRO DEVIC, 10-K, March 01, 2005