AMD 2010 Annual Report Download - page 26

Intel exerts substantial influence over computer manufacturers and their channels of distribution through
various brand and other marketing programs. As a result of Intel’s dominant position in the microprocessor
market, Intel has been able to control x86 microprocessor and computer system standards and benchmarks and to
dictate the type of products the microprocessor market requires of us. Intel also dominates the computer system
platform, which includes core logic chipsets, graphics chips, motherboards and other components necessary to
assemble a computer system. OEMs that purchase microprocessors for computer systems are highly dependent
on Intel, less innovative on their own and, to a large extent, are distributors of Intel technology. Additionally,
Intel is able to drive de facto standards for x86 microprocessors that could cause us and other companies to have
delayed access to such standards.
Intel also leverages its dominance in the microprocessor market to sell its integrated chipsets. Intel
manufactures and sells integrated graphics chipsets bundled with their microprocessors and is a dominant
competitor with respect to this portion of our business. Moreover, computer manufacturers are increasingly using
integrated graphics chipsets rather than discrete graphics components, particularly for notebooks, because they
cost less than traditional discrete graphics components while offering satisfactory graphics performance for most
mainstream PCs. Intel could also take actions that place our discrete GPUs at a competitive disadvantage,
including giving one or more of our competitors in the graphics market, such as Nvidia Corporation, preferential
access to its proprietary graphics interface or other useful information.
Intel has substantially greater financial resources than we do and accordingly spends substantially greater
amounts on research and development than we do. We expect Intel to maintain its dominant position and to
continue to invest heavily in marketing, research and development, new manufacturing facilities and other
technology companies. To the extent Intel manufactures a significantly larger portion of its microprocessor
products using more advanced process technologies, or introduces competitive new products into the market
before we do, we may be more vulnerable to Intel’s aggressive marketing and pricing strategies for
microprocessor products.
Intel’s dominant position in the microprocessor market and integrated graphics chipset market, its existing
relationships with top-tier OEMs and its aggressive marketing and pricing strategies could result in lower unit
sales and a lower average selling price for our products, which could have a material adverse effect on us.
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. For example, we expect our customers to ship computer systems with our AMD Fusion accelerated
APU codenamed “Llano,” in the second quarter of 2011. If we fail to or 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.
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
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