AMD 2007 Annual Report Download - page 33

Table of Contents
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. We
also rely on third party manufacturers to manufacture our high end graphics boards. 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 manufacturers 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 also fabricate wafers and assemble,
test and package products for other companies, including certain of our competitors. 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 product in a short time frame. We could experience significant
delays in the shipment of our products if we are required to find alternative foundries or contractors. 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. With respect to Chartered, we rely on their ability to implement our technology for manufacturing our
AMD64-based processors at their facilities on a timely basis. 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 a material 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 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 used in the manufacture of our graphics products are currently available from only a limited number of sources and are often subject to
rapid changes in price and availability. Interruption of supply or increased demand in the industry could cause shortages and price increases in various essential
materials. If we are unable to procure certain of these materials, we may have to reduce our manufacturing operations. Such a reduction has in the past and could
in the future have a material adverse effect on us.
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Source: ADVANCED MICRO DEVIC, 10-K, February 26, 2008