AMD 2005 Annual Report Download - page 16

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Table of Contents
For example, Intel exerts substantial influence over PC manufacturers and their channels of distribution through various brand and marketing programs.
Because of its dominant position in the microprocessor market, Intel has been able to control x86 microprocessor and PC system standards and dictates the type
of products the microprocessor market requires of Intel’s competitors. 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.
Our microprocessors are not designed to function with motherboards and chipsets designed to work with Intel microprocessors because our patent
cross-license agreement with Intel does not extend to Intel’s proprietary bus interface protocol. Therefore, 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 that support our microprocessor
offerings. In recent years, many of these third-party designers and manufacturers have lost significant market share to Intel or exited the business. 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.
Competition With Respect to Our Personal Connectivity Solutions
With respect to our embedded processors for personal connectivity devices, our principal competitors are Freescale, Hitachi, Intel, NEC Corporation,
Toshiba and Via Technologies. We expect competition in the market for these devices to increase as our principal competitors focus more resources on
developing low-power embedded processor solutions.
Competition in the Flash Memory Market
Prior to the closing of Spansion’s IPO on December 21, 2005, we sold Spansion’s Flash memory products. With respect to Flash memory products, our
principal competitors were Intel, Samsung Electronics Co., Ltd., STMicroelectronics N.V., Silicon Storage Technology, Macronix International Co., Ltd.,
Toshiba Corporation, Sharp Electronics Corp. and Renesas Technology Corp. In the future, Spansion’s principal competitors may also include the joint venture
between Intel and Micron Technology. Most of these competitors market devices incorporating MLC floating gate technology. We believe many of Spansion’s
other competitors plan to develop MLC technology. Some of these competitors, including Intel, Samsung, STMicroelectronics, Toshiba, Sharp and Renesas, are
more broadly diversified than Spansion and may be able to sustain lower operating margins in their Flash memory business based on profitability of their other,
non-Flash memory businesses.
Competition in the market for Flash memory devices is likely to increase as existing manufacturers introduce new products, new manufacturers enter the
market, industry-wide production capacity increases and
11
Source: ADVANCED MICRO DEVIC, 10-K, February 27, 2006