AMD 2006 Annual Report Download - page 17

Table of Contents
Customers of our graphics and chipset products consist primarily of: PC OEMs, often through ODMs or other contract manufacturers who build GPUs into
their PC motherboard and graphics board products, add-in-board, or AIB, manufacturers who incorporate GPUs into their graphics board products, SIs, who
build GPUs into their PC products, third party distributors, retail stores and e-commerce retailers.
Customers of our products for consumer electronic devices consist primarily of OEMs and ODMs.
Our sales and marketing teams work closely with our customers to define product features, performance and timing of new products so that the products
we are developing meet the needs of our customers. We also employ application engineers to assist our customers in designing, testing and qualifying system
designs that incorporate our products in order to assist in optimizing product compatibility. We believe that our commitment to customer service and design
support improves our customers’ time-to-market and fosters relationships that encourage customers to use the next generation of our products.
Original Equipment Manufacturers
We focus on three types of OEMs: multi-nationals, selected regional accounts and target market customers. Large multi-nationals and regional accounts
are our core OEM customers. Our OEM customers include numerous foreign and domestic manufacturers of servers and workstations, desktop and notebook
PCs, PC motherboards and consumer electronics products such as mobile phones and digital TVs. Under our standard terms and conditions, OEMs do not have a
right to return our products other than pursuant to the standard limited warranty. However, from time to time we may agree to repurchase a portion of some
categories of products pursuant to negotiated terms.
In 2006, Hewlett-Packard Company accounted for greater than 10 percent of our consolidated net revenues. Sales to Hewlett-Packard consisted primarily
of products from our Computation Products segment. In addition, one handset manufacturer accounted for more than half of the revenue attributable to our
Consumer Electronics segment and one game console provider accounted for a significant portion of revenue attributable to our Consumer Electronics segment.
Moreover, two customers accounted for approximately one third of the revenue attributable to our Graphics and Chipsets segment. A loss of any of these
customers could have a material adverse effect on our business.
Third-Party Distributors
Our authorized distributors resell to sub-distributors and mid-sized and smaller OEMs and ODMs. Typically, distributors handle a wide variety of
products, including those that compete with our products. Distributors typically maintain an inventory of our products. In most instances, our agreements with
distributors protect their inventory of our products against price reductions and provide return rights with respect to any product that we have removed from our
price book and that is not more than twelve months older than the manufacturing code date. In addition, some agreements with our distributors may contain
standard stock rotation provisions permitting limited levels of product returns.
In 2006, Avnet, Inc. and its subsidiaries and affiliated companies accounted for approximately 10 percent of our consolidated net revenue. Avnet is a
distributor of our products and sales to Avnet consisted primarily of products, from our Computation Products segment.
AIB Manufacturers and System Integrators
We strive to establish and broaden our relationships with AIB manufacturers. We offer component-level graphics and chipset products to AIB
manufacturers who in turn build and sell board-level products using our technology to SIs and at retail. We also work directly with our SI customers. SIs
typically sell from positions of regional or product-based strength in the market. They usually operate on short design cycles and can respond quickly with new
technologies. SIs often use discrete graphics solutions as a means to differentiate their products and add value to their customers.
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Source: ADVANCED MICRO DEVIC, 10-K, March 01, 2007