AMD 2005 Annual Report Download - page 60

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Table of Contents
market share in the mobile category of the microprocessor market, and particularly the “thin and light” category. Accordingly, we are making substantial
investments in our roadmaps and our platforms for our processors for mobile and server computers. Increasing market acceptance of these processors, our AMD
Athlon 64 processors for desktops and the AMD64 technology on which they are based is subject to risks and uncertainties including:
• the continued support of operating system and application program providers for our 64-bit instruction set, including timely development of 64-bit
software applications and applications that can take advantage of the functionality of dual-core processors;
• our ability to produce these processors in a timely manner on advanced process technologies, in the volume and with the performance and feature set
required by customers; and
• the availability, performance and feature set of motherboards, memory and chipsets designed for these processors, in the volume and with the
performance and feature set required by our customers.
If we are unable to achieve further market acceptance of our AMD64 technology, we would be materially adversely affected.
We cannot be certain that our substantial investments in research and development of process technologies will lead to timely improvements in
technology and equipment used to fabricate our products or that we will have sufficient resources to invest in the level of research and development that
is required to remain competitive.
We make substantial investments in research and development for process technologies in an effort to design and manufacture leading-edge
microprocessors. We cannot be certain that we will be able to develop, obtain or successfully implement leading-edge process technologies needed to
manufacture future generations of our products profitably or on a timely basis or that our competitors will not develop new technologies, products or processes
that render our products uncompetitive or obsolete. Furthermore, we cannot assure you that we will have sufficient resources to maintain the level of investment
in research and development that is required for us to remain competitive.
For example, we have a joint development agreement with IBM, pursuant to which we have agreed to work together to develop new process technologies
through December 31, 2011. However, capital purchases by IBM necessary for the continued development of process development projects past December 31,
2008 are conditioned upon the approval by IBM’s board of directors. If such approval is not received by September 30, 2007, either party has the right to
terminate the agreement effective December 31, 2008 without liability. We anticipate that under this agreement, from December 25, 2005 through December 25,
2011, we would pay fees to IBM of between $502 million and $562 million in connection with joint development projects. In addition, from the beginning of
2002 through December 25, 2005, we paid $339 million to IBM in connection with agreements and services related to license grants and research and
development activities.
If this agreement were to be terminated, we would either have to resume certain research and development activities internally or find an alternate partner.
In either case, our research and development costs could increase, and we could experience delays or other setbacks in the development of new process
technologies, any of which would materially adversely affect us. Moreover, the timely achievement of the milestones set forth in the joint development
agreement is critical to our ability to continue to manufacture microprocessors at Fab 36 using advanced process technologies.
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 conjunction with constant and rapid technological
change, wide fluctuations in supply and demand, continuous
55
Source: ADVANCED MICRO DEVIC, 10-K, February 27, 2006