AMD 2008 Annual Report Download - page 25

Other than Intel, our principal competitor is Nvidia Corporation, and to a lesser extent, Matrox Electronic
Systems Ltd., Silicon Integrated Systems Corp. and Via Technologies, Inc. Other competitors include a number
of smaller companies, which may have greater flexibility to address specific market needs, but lesser financial
resources to do so, especially as we believe that the growing complexity of visual processors and the associated
research and development costs represent an increasingly high barrier to entry in this market.
In the game console category, we compete primarily against Nvidia Corporation. Other competitors include
Intel Corporation and IBM.
Research and Development
We focus our microprocessor research and development activities on product design and system and
manufacturing process development. One main area of focus is on delivering the next generation of
microprocessors with improved system performance and performance-per-watt characteristics. We have devoted
significant resources to product design and to developing and improving manufacturing process technologies. We
also work with other industry leaders, public foundations, universities and industry consortia to conduct early
stage research and development.
With respect to graphics, our primary research and development objective is to develop products and
technologies that meet the ever-changing demands of the PC industry on a timely basis so as to meet market
windows. We are also focusing on delivering a range of integrated platforms to serve key markets, including
commercial clients, mobile computing, and gaming and media computing. We believe that these integrated
platforms will bring customers improved system stability, better time-to-market and increased performance and
energy efficiency. Longer-term, our research and development efforts are focused on developing monolithic
silicon solutions for specialized uses that are comprised of microprocessors, graphics processors and video
processors.
Our research and development expenses for 2008, 2007, and 2006 were approximately $1.8 billion, $1.8
billion and $1.2 billion, respectively. However, research and development expenses for 2006 are not comparable
to prior years because they included ATI’s research and development expenses only from October 25, 2006
through December 31, 2006. For more information, see Part II, Item 7—“Management’s Discussion and Analysis
of Financial Condition and Results of Operations,” or MD&A.
We conduct product and system research and development activities for our microprocessor products in the
United States with additional design and development engineering teams located in Germany, Singapore, China,
Japan, Malaysia, Taiwan and India. We conduct research and development activities for our graphics and chipset
products at design centers located throughout the world, including in the United States, Canada, India and China.
In 2008, we conducted our microprocessor manufacturing process development activities primarily through
our joint development agreement with IBM. Under this Joint Development Agreement or JDA, we jointly
conducted development activities on new process technologies, including 45-nanometer, 32-nanometer,
22-nanometer and certain other advanced technologies, to be implemented on silicon wafers. Our relationship
also included laboratory-based research of emerging technologies such as new transistor, interconnect,
lithography and die-to-package connection technologies. We paid fees to IBM for joint development projects and
we agreed to pay IBM royalties upon the occurrence of specified events, including in the event that we sublicense
the jointly developed process technologies to specified third parties or if we bump wafers for a third party.
Bumping wafers is one of the final stages of the manufacturing process in which wafers are prepared for
assembly and test. For more information on the fees paid to IBM, see “Part II, Item 7, MD&A—Contractual
Cash Obligations and Guarantees—Unconditional Purchase Commitments.”
As part of the transactions contemplated by the Master Transaction Agreement, upon consummation of the
transactions, we and The Foundry Company intend to enter into a Wafer Supply Agreement pursuant to which
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