AMD 2006 Annual Report Download - page 25

Table of Contents
ITEM 1A. 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 for many years. 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 have in
the past and are likely in the future to result in lower unit sales and average selling prices for our products and adversely affect our margins and profitability.
Intel also manufactures and sells integrated graphics chipsets bundled with their microprocessors and is a dominant competitor with respect to this portion
of our new semiconductor graphics business that we have added through the acquisition of ATI. It is possible that Intel could leverage its dominance in the
microprocessor market to sell its integrated chipsets, which could shrink the total available market for certain of our discrete GPUs, that Intel could re-enter the
discrete GPU market, or that Intel will take other actions that place our discrete GPUs and integrated chipsets at a competitive disadvantage such as designing a
proprietary graphics interface. Moreover, computer manufacturers are increasingly using integrated graphics chipsets, particularly for notebooks, because they
cost significantly less than traditional discrete graphics components while offering reasonably good graphics performance for most mainstream PCs. The success
of our graphics business is dependent, in part, upon the success of our integrated chipset products. If our graphics products do not successfully address the
discrete GPU and integrated chipset markets, our graphics business could be adversely affected.
As long as Intel remains in this dominant position, we may be materially adversely affected by Intel’s:
• business practices, including rebating and allocation strategies and pricing actions, designed to limit our 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 software companies as well as the graphics interface for Intel platforms; and
• marketing and advertising expenditures in support of positioning the Intel brand over the brand of its OEM customers.
Intel exerts substantial influence over computer 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 computer system standards and to dictate
the type of products the microprocessor market requires of Intel’s competitors. Intel also dominates the computer system platform, which includes core logic
chipsets, graphics chips, motherboards and other components necessary to assemble a computer system. As a result, OEMs that purchase microprocessors for
computer systems 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 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 a large portion of its processors using 65-nanometer technology
whereas we only began commercial shipments of processors
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Source: ADVANCED MICRO DEVIC, 10-K, March 01, 2007