AMD 2005 Annual Report Download - page 59

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Table of Contents
RISK FACTORS
Risks Related to Our Business
Intel Corporation’s dominance of the microprocessor market and its aggressive business practices may limit our ability to compete effectively.
Intel has dominated the market for microprocessors used in desktop and mobile PCs for many years. Intel is also a dominant competitor in the server
category of the microprocessor market. Intel’s significant financial resources enable it to market its products aggressively, to target our customers and our
channel partners with special incentives, and to discipline customers who do business with us. These aggressive activities can result in lower unit sales and
average selling prices for our products and adversely affect our margins and profitability. As long as Intel remains in this dominant position, we may be
materially adversely affected by Intel’s:
• business practices, including pricing and allocation strategies and actions, such as aggressive pricing for microprocessors to increase market share;
• product mix and introduction schedules;
• product bundling, marketing and merchandising strategies;
• exclusivity payments to its current and potential customers;
• control over industry standards, PC manufacturers and other PC industry participants, including motherboard, memory, chipset and basic input/output
system, or BIOS, suppliers; and
• marketing and advertising expenditures in support of positioning the Intel brand over the brand of its OEM customers.
For example, Intel exerts substantial influence over PC manufacturers and their channels of distribution through various brand and other marketing
programs. Because of its dominant position in the microprocessor market, Intel has been able to control x86 microprocessor and PC system standards and dictate
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.
We expect Intel to maintain its dominant position in the microprocessor market and to continue to invest heavily in marketing, 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. Moreover, Intel currently manufactures certain of its microprocessor products on 300-millimeter wafers using 65-nanometer
process technology whereas we expect to make our first production shipments of products manufactured on 300-millimeter wafers using 90-nanometer process
technology in the first quarter of 2006. We expect to begin commercial shipments of microprocessors manufactured using 65-nanometer technology by the end of
2006. To the extent Intel manufactures its microprocessor products on larger wafers and smaller process technologies earlier than we do, we may be more
vulnerable to Intel’s aggressive marketing and pricing strategies for microprocessor products, which may result in market share gains for Intel. Intel’s dominant
position in the microprocessor market, its existing relationships with top-tier OEMs and its aggressive marketing and pricing strategies could result in lower unit
sales and average selling prices for our products, which could have a material adverse effect on us.
We must achieve further market acceptance of our 64-bit technology, AMD64, or we will be materially adversely affected.
Our AMD Opteron processors are critical to our strategy of increasing market share in the server category of the microprocessor market. Similarly, our
AMD Turion 64 processors are critical to our strategy of increasing
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Source: ADVANCED MICRO DEVIC, 10-K, February 27, 2006