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Table of Contents
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. If adoption of Spansion’s MirrorBit technology occurs at a slower rate than Spansion anticipates, Spansion’s ability to compete will be
reduced, and Spansion would be materially adversely affected. If Spansion does not achieve market acceptance of products incorporating this technology,
Spansion would be materially adversely affected.
Spansion Flash memory products are based on NOR architecture, and a significant market shift to NAND architecture could materially adversely affect
Spansion.
Flash memory products are generally based either on NOR architecture or NAND architecture. To date, Spansion’s Flash memory products have been
based on NOR architecture, which are typically produced at a higher cost-per-bit than NAND-based products. Spansion does not currently manufacture products
based on NAND architecture. From 2003 through 2005, industry sales of NAND-based products grew at higher rates than sales of NOR-based products, resulting
in NAND vendors in aggregate gaining a greater share of the overall Flash memory market and NOR vendors in aggregate losing overall market share. In fact, in
2005, sales of NAND-based Flash memory products represented a majority of the Flash memory products sold in the overall Flash memory market. Moreover,
the removable storage category of the Flash memory market, which is currently the second largest category after wireless, and is predominantly served by NAND
vendors, is expected to be the fastest growing portion of the Flash memory market for the foreseeable future. As mobile phones and other consumer electronics
become more advanced, they will require higher density Flash memory to meet the increased data storage requirements associated with music downloads, photos
and videos. Because storage requirements will increase to accommodate data-intensive applications, OEMs may increasingly choose NAND-based products over
NOR-based products for their applications. Moreover, some NAND vendors are manufacturing on 300-millimeter wafers or are utilizing more advanced
manufacturing process technologies than Spansion is today, which results in an ability to offer products with a lower cost-per bit at a given product density. If
NAND vendors continue to increase their share of the Flash memory market, Spansion’s market share may decrease, which would materially adversely affect
Spansion.
If Spansion fails to successfully develop products based on its new ORNAND architecture, or if there is a lack of market acceptance of products based
on its ORNAND architecture, Spansion’s future operating results would be materially adversely affected.
As mobile phones become more advanced, they will require higher density Flash memory to meet increased data storage requirements. Spansion has stated
its intention to position itself to address the increasing demand for higher density Flash memory within the wireless category of the Flash memory market by
offering products based on its ORNAND architecture, which Spansion has recently introduced. The success of its ORNAND architecture requires that Spansion
timely and cost effectively develop, manufacture and market ORNAND-based products that are competitive with NAND-based Flash memory products in the
wireless category of the Flash memory market. If Spansion fails to develop and commercialize its ORNAND architecture on a timely basis or if Spansion’s
ORNAND-based products fail to achieve acceptance in the wireless market, Spansion’s operating results would be materially adversely affected.
The loss of a significant mobile phone customer may have a material adverse effect on Spansion.
Sales of Spansion products are dependent to a large extent on demand for mobile phones. Historically, a small number of customers in the wireless
category have driven a substantial portion of net sales. If one of these customers decided to stop buying Spansion’s products, or if one of these customers were
materially to reduce its operations or its demand for Spansion’s products, Spansion would be materially adversely affected.
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Source: ADVANCED MICRO DEVIC, 10-K, February 27, 2006