AMD 2006 Annual Report Download - page 31

Table of Contents
fundamental role in our growth plans for the next several years. In order to transition Fab 30 to a 300-millimeter facility, we plan to incrementally bring down its
200-millimeter output beginning in mid 2007, and we do not expect to have any 300-millimeter output until early 2008. If we are not able to achieve our
production plans on a timely basis, we may not have sufficient manufacturing capacity to meet anticipated demand for our microprocessor products. If we cannot
obtain sufficient manufacturing capacity to meet demand for our microprocessor products, either in our own facilities or through foundry or similar
arrangements, we could be materially adversely affected.
We rely on third party foundries and other contractors to manufacture certain products.
We rely on independent foundries such as Taiwan Semiconductor Manufacturing Company and United Microelectronics Corp. to manufacture our
graphics and chipset products. Chartered Semiconductor manufactures some of our microprocessor products and products for consumer electronics devices.
Independent contractors also perform the assembly, testing and packaging of these products. We obtain these manufacturing services for our graphics and chipset
products and products for consumer electronics devices on a purchase order basis and these foundries are not required to provide us with any specified minimum
quantity of product. Accordingly, our graphics and consumer electronics businesses depend on these suppliers to allocate to us a portion of their manufacturing
capacity sufficient to meet our needs, to produce products of acceptable quality and at acceptable manufacturing yields and to deliver those products to us on a
timely basis at acceptable prices. We cannot assure you that these manufacturers will be able to meet our near-term or long-term manufacturing requirements.
The manufacturers we use fabricate wafers for other companies, including certain of our competitors. With respect to our graphics and chipset products and
products for consumer electronics devices, they could choose to prioritize capacity for other users, reduce or eliminate deliveries to us, or increase the prices that
they charge us on short notice.
We must have reliable relationships with our wafer manufacturers and subcontractors to ensure adequate product supply to respond to customer demand. If
we move production of our products to new manufacturers or if current manufacturers implement new process technology or design rules, any transition
difficulties may result in lower yields or poorer performance of our products. Because it could take several quarters to establish a strategic relationship with a
new manufacturing partner, we may be unable to secure an alternative supply for any specific graphics product in a short time frame. Other risks associated with
our dependence on third-party manufacturers include reduced control over delivery schedules, quality assurance, manufacturing yields and cost, lack of capacity
in periods of excess demand, misappropriation of our intellectual property, dependence on several small undercapitalized subcontractors, reduced ability to
manage inventory and parts, and exposure to foreign countries and operations. If we are unable to secure sufficient or reliable supplies of wafers, our ability to
meet customer demand for our graphics and consumer electronics businesses may be adversely affected and this could have an adverse effect on us.
If essential equipment or materials are not available to manufacture our products, we could be materially adversely affected.
Our microprocessor manufacturing operations depend upon obtaining deliveries of equipment and adequate supplies of materials on a timely basis. We
purchase equipment and materials from a number of suppliers. From time to time, suppliers may extend lead times, limit supply to us or increase prices due to
capacity constraints or other factors. Because the equipment that we purchase is complex, it is difficult for us to substitute one supplier for another or one piece of
equipment for another. Certain raw materials we use in manufacturing our microprocessor products or that are used in the manufacture of our graphics products
are available only from a limited number of suppliers.
For example, we are largely dependent on one supplier for our 200-millimeter and 300-millimeter silicon-on-insulator (SOI) wafers that we use to
manufacture our microprocessor products. We are also dependent on key chemicals from a limited number of suppliers and rely on a limited number of foreign
companies to supply the majority of certain types of integrated circuit packages for our microprocessor products. Similarly, certain non-proprietary materials or
components such as memory, PCBs, substrates and capacitors
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Source: ADVANCED MICRO DEVIC, 10-K, March 01, 2007