AMD 2007 Annual Report Download - page 31

Table of Contents
The markets in which our products are sold are highly competitive.
The markets in which our products are sold are very competitive, and delivering the latest and best products to market on a timely basis is critical to
achieving revenue growth. We expect competition to intensify due to rapid technological changes, frequent product introductions and aggressive pricing by
competitors. We believe that the main factors that determine our competitiveness are product quality, power consumption, reliability, speed, size (or form factor),
cost, selling price, adherence to industry standards, software and hardware compatibility and stability, brand recognition, timely product introductions and
availability. After a product is introduced, costs and average selling prices normally decrease over time as production efficiency improves, and successive
generations of products are developed and introduced for sale. We expect that competition will intensify in these markets and our competitors’ products may be
less costly, provide better performance or include additional features that render our products uncompetitive. With respect to our graphics products, Intel and
Nvidia are our principal competitors. Some competitors may have greater access or rights to companion technologies, including interface, processor and memory
technical information. Competitive pressures could adversely impact the demand for our products, which could harm our revenue and gross margin.
If we fail to continue to improve the efficiency of our supply chain in order to respond to increases or changes in customer demand for our products,
our business could be materially adversely affected.
Our ability to meet customer demand for our products depends, in part, on our ability to deliver the products our customers want on a timely
basis. Accordingly, we must continually improve the management of our supply chain by synchronizing the entire supply chain, from sourcing through
manufacturing, distribution and fulfillment. As we continue to grow our business, acquire new OEM customers and strengthen relationships with existing OEM
customers, the efficiency of our supply chain will become increasingly important because OEMs tend to have specific requirements for particular products, and
specific time-frames in which they require delivery of these products. We have recently experienced challenges related to the logistics of selling our products
across a diverse set of customers and geographies and delivering these products on a timely basis. If we fail to continue to improve the efficiency of our supply
chain and adjust our operations in response to future increases or changes in OEM demand for our products, our business could be materially adversely affected.
We depend on third-party companies for the design, manufacture and supply of motherboards, BIOS software and other components.
We depend on third-party companies for the design, manufacture and supply of motherboards, BIOS software and other components that support our
microprocessor offerings. In addition, we continue to work with other third parties to obtain graphics chips in order to provide our customers with a greater
choice of technologies to best meet their needs.
Our microprocessors are not designed to function with motherboards and chipsets designed to work with Intel microprocessors because our patent
cross-license agreement with Intel does not extend to Intel’s proprietary bus interface protocol. If we are unable to secure sufficient support for our
microprocessor products from designers and manufacturers of motherboards and chipsets, our business would be materially adversely affected. Our acquisition of
ATI could exacerbate this problem because we design and supply a significantly greater amount of graphics products ourselves. Doing so could cause third-party
designers, manufacturers and suppliers to be less willing to do business with us or to support our products out of a perceived risk that we will be less willing to
support their products or because we may compete with them. As a result, these third-party designers, manufacturers and suppliers could forge relationships, or
strengthen their existing relationships, with our competitors. If the designers, manufacturers and suppliers of graphics chips, motherboards, and other components
decrease their support for our product offerings and increase their support for the product offerings of our competitors, our business could be materially adversely
affected.
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Source: ADVANCED MICRO DEVIC, 10-K, February 26, 2008