AMD 2006 Annual Report Download - page 44

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Spansion may not be able to negotiate prices with these third parties on terms as favorable to Spansion as those previously available to Spansion because it is not
able to take advantage of our size and purchasing power. These parties, and other third parties with whom we had no prior intellectual property arrangement, may
file lawsuits against Spansion seeking damages (potentially including treble damages) or an injunction against the sale of Spansion’s products that incorporate
allegedly infringed intellectual property or against the operation of Spansion’s business as presently conducted. Such litigation could be extremely expensive and
time-consuming. Spansion cannot be sure that such litigation would be avoided or successfully concluded. The award of damages, including material royalty
payments, or the entry of an injunction against the manufacture or sale of some or all of Spansion’s products, would have a material adverse effect on Spansion.
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. Spansion has developed its MirrorBit ORNAND architecture to address certain portions of the integrated category of the Flash
memory market served by NAND-based products, but it cannot be certain that its MirrorBit ORNAND-based products will satisfactorily address those market
needs.
During 2004, industry sales of NAND-based Flash memory products grew at a higher rate than sales of NOR-based Flash memory 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. This trend
continued in 2005 and 2006 when sales of NAND-based Flash memory products represented a majority of the Flash memory products sold in the overall Flash
memory market. In 2005, and the first half of 2006, 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 predominantly served by floating gate NAND vendors, is expected to be
a significant 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 higher density floating gate NAND-based Flash memory
products over MirrorBit NOR-, ORNAND- or Quad-based Flash memory products for their applications. If this occurs and OEMs continue to prefer the
attributes and characteristics of floating gate NAND-based products over those of MirrorBit NOR-, ORNAND- or Quad-based products for their applications,
Spansion may be materially and adversely affected. Moreover, some floating gate NAND vendors are manufacturing on 300-millimeter wafers or may choose to
utilize more advanced manufacturing process technologies than Spansion uses today to offer products competitive to Spansion’s at a lower cost. If floating gate
NAND vendors continue to increase their share of the Flash memory market, Spansion’s market share may decrease, which would materially adversely affect
Spansion.
Competitors may introduce new memory or other technologies that may make Spansion’s Flash memory products uncompetitive or obsolete.
Spansion’s competitors are working on a number of new technologies, including FRAM, MRAM, polymer and phase-change based memory technologies.
If successfully developed and commercialized as a viable alternative to Flash memory, these or other technologies could pose a competitive threat to a number of
Flash memory companies, including Spansion. In addition, Spansion and some of Spansion’s competitors have licensed Flash memory intellectual property
associated with NROM technology from a third party. Use of this NROM intellectual property may allow these competitors to develop Flash memory technology
that may compete with MirrorBit technology.
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Source: ADVANCED MICRO DEVIC, 10-K, March 01, 2007