AMD 2010 Annual Report Download - page 36

Our reliance on third-party distributors and add-in-board partners (AIBs) subjects us to certain risks.
We market and sell our products directly and through third-party distributors and AIBs pursuant to
agreements that can generally be terminated for convenience by either party upon prior notice to the other party.
These agreements are non-exclusive and permit both our distributors and AIBs to offer our competitors’
products. We are dependent on our distributors and AIBs to supplement our direct marketing and sales efforts. If
any significant distributor or AIB or a substantial number of our distributors or AIBs terminated their relationship
with us or decided to market our competitors’ products over our products, our ability to bring our products to
market would be impacted and we would be materially adversely affected.
Additionally, distributors and AIBs typically maintain an inventory of our products. In most instances, our
agreements with distributors protect their inventory of our products against price reductions, as well as provide
return rights for any product that we have removed from our price book and that is not more than twelve months
older than the manufacturing code date. Some agreements with our distributors also contain standard stock
rotation provisions permitting limited levels of product returns. Our agreements with AIBs protect their inventory
of our products against price reductions. We defer the gross margins on our sales to distributors and AIBs,
resulting from both our deferral of revenue and related product costs, until the applicable products are re-sold by
the distributors or the AIBs. However, in the event of a significant decline in the price of our products, the price
protection rights we offer would materially adversely affect us because our revenue would decline.
Our worldwide operations are subject to political and economic risks and natural disasters, which could
have a material adverse effect on us.
We maintain operations around the world, including in the United States, Canada, Europe and Asia. We rely
on third party wafer foundries in Europe and Asia. Nearly all product assembly and final testing of our products
is performed at manufacturing facilities, operated by us as well as third party manufacturing facilities, in China,
Malaysia, Singapore and Taiwan. We also have international sales operations. International sales, as a percent of
net revenue were 88% in 2010. We expect that international sales will continue to be a significant portion of total
sales in the foreseeable future.
The political and economic risks associated with our operations in foreign countries include, without
limitation:
• expropriation;
• changes in a specific country’s or region’s political or economic conditions;
• changes in tax laws, trade protection measures and import or export licensing requirements;
• difficulties in protecting our intellectual property;
• difficulties in achieving headcount reductions;
• changes in foreign currency exchange rates;
• restrictions on transfers of funds and other assets of our subsidiaries between jurisdictions;
• changes in freight and interest rates;
• disruption in air transportation between the United States and our overseas facilities;
• loss or modification of exemptions for taxes and tariffs; and
• compliance with U.S. laws and regulations related to international operations, including export control
regulations and the Foreign Corrupt Practices Act.
In addition, our worldwide operations could be subject to natural disasters such as earthquakes, typhoons
and volcanic eruptions that disrupt manufacturing or other operations. For example, our Sunnyvale operations are
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