AMD 2007 Annual Report Download - page 29

Table of Contents
If this agreement were to be terminated, we would have to substantially increase our research and development activities internally, which could
significantly increase our research and development costs, and we could experience delays or other setbacks in the development of new process technologies, any
of which would materially adversely affect us. Moreover, the timely achievement of the milestones set forth in the joint development agreement is critical to our
ability to continue to manufacture microprocessors using advanced process technologies.
The success of our business is dependent upon our ability to introduce products on a timely basis with required features and performance levels that
provide value to our customers and support and coincide with significant industry transitions.
Our success depends to a significant extent on the development, qualification, implementation and acceptance of new product designs and improvements
that provide value to our customers. Our ability to develop and qualify new products and related technologies to meet evolving industry requirements, at prices
acceptable to our customers and on a timely basis are significant factors in determining our competitiveness in our target markets. If we are delayed in
developing or qualifying new products or technologies, we may lose competitive positioning, which could cause us to lose market share and require us to
discount the selling prices of our products. For example, in the third quarter of 2007, we commenced initial shipments of our quad core AMD Opteron
processors, but our initial production ramp of these processors was slower than we anticipated because we had to undertake design and process tuning. We expect
to ship in more significant volumes during the first half of 2008.
Delays in developing or qualifying new products can also cause us to miss our customers’ product design windows. If our customers do not include our
products in the initial design of their computer systems, they will typically not use our products in their systems until at least the next design configuration. The
process of being qualified for inclusion in a customer’s system can be lengthy and could cause us to further miss a cycle in the demand of end-users, which also
could result in a loss of market share and harm our business.
Moreover, market demand requires that products incorporate new features and performance standards on an industry-wide basis. Over the life of a specific
product, the average selling price undergoes regular price reductions. The introduction of new products and enhancements to existing products is necessary to
maintain overall corporate average selling prices. If we are unable to introduce new products or launch new products with sufficient increases in average selling
price or increased unit sales volumes capable of offsetting these reductions in average selling prices of existing products, our revenues, inventories, gross margins
and operating results could be materially adversely affected.
Our ability to design and introduce new graphics products in a timely manner is dependent upon third party intellectual property.
In the design and development of new products and graphics product enhancements, we rely on third-party intellectual property such as software
development tools. Historically, ATI has experienced delays in the introduction of products as a result of the inability of then available software development
tools to fully simulate the complex features and functionalities of its products. The design requirements necessary to meet consumer demands for more features
and greater functionality from graphics products in the future may exceed the capabilities of the software development tools available to us. If the third-party
intellectual property that we use becomes unavailable or fails to produce designs that meet consumer demands, our business could be materially adversely
affected.
The loss of a significant customer may have a material adverse effect on us.
Collectively, our top five customers accounted for over 40 percent of our total revenue in 2007. Moreover, historically a significant portion of ATI’s
revenues were derived from sales to a small number of customers, and we expect that a small number of customers will continue to account for a substantial part
of revenues from our
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Source: ADVANCED MICRO DEVIC, 10-K, February 26, 2008