AMD 2008 Annual Report Download - page 23

Original Equipment Manufacturers
We focus on three types of OEMs: multi-nationals, selected regional accounts and target market customers.
Large multi-nationals and regional accounts are our core OEM customers. Our OEM customers include
numerous foreign and domestic manufacturers of servers and workstations, desktop and notebook PCs, and PC
motherboards. Under our standard terms and conditions, OEMs do not have a right to return our products other
than pursuant to the standard limited warranty.
In 2008, Hewlett-Packard Company accounted for more than 10 percent of our consolidated net revenues.
Sales to Hewlett-Packard consisted primarily of products from our Computing Solutions segment. In addition,
four customers accounted for approximately 45 percent of the net revenue attributable to our Graphics segment.
A loss of any of these customers could have a material adverse effect on our business.
Third-Party Distributors
Our authorized distributors resell to sub-distributors and mid-sized and smaller OEMs and ODMs.
Typically, distributors handle a wide variety of products, including those that compete with our products.
Distributors typically maintain an inventory of our products. In most instances, our agreements with distributors
protect their inventory of our products against price reductions and provide return rights with respect to any
product that we have removed from our price book that is not more than twelve months older than the
manufacturing code date. In addition, some agreements with our distributors may contain standard stock rotation
provisions permitting limited levels of product returns.
AIB Manufacturers and System Integrators
We strive to establish and broaden our relationships with AIB manufacturers. We offer component-level
graphics and chipset products to AIB manufacturers who in turn build and sell board-level products using our
technology to system integrators, or SIs, and at retail. We also sell directly to our SI customers. SIs typically sell
from positions of regional or product-based strength in the market. They usually operate on short design cycles
and can respond quickly with new technologies. SIs often use discrete graphics solutions as a means to
differentiate their products and add value to their customers.
Competition
Generally, the IC industry is intensely competitive. Products typically compete on product quality, power
consumption, reliability, performance, size (or form factor), cost, selling price, adherence to industry standards,
software and hardware compatibility and stability, brand recognition, timely product introductions and
availability. Technological advances in the industry result in frequent product introductions, regular price
reductions, short product life cycles and increased product capabilities that may result in significant performance
improvements. Our ability to compete depends on our ability to develop, introduce and sell new products or
enhanced versions of existing products on a timely basis and at competitive prices, while reducing our
manufacturing costs.
Competition in the Microprocessor Market
Intel Corporation has dominated the market for microprocessors for many years. Intel’s market power and
significant financial resources enable it to market its products aggressively, to target our customers and our
channel partners with special incentives and to discipline customers who do business with us. These aggressive
activities have in the past and are likely in the future to result in lower unit sales and average selling prices for
our products, and adversely affect our margins and profitability.
Intel exerts substantial influence over computer manufacturers and their channels of distribution through
various brand and marketing programs. Because of its dominant position in the microprocessor market, Intel has
been able to control x86 microprocessor and computer system standards and to dictate the type of products the
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