AMD 2011 Annual Report Download - page 19

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Other than Intel, our principal competitor in the graphics market is Nvidia. AMD and Nvidia are the two
principal players offering discrete graphics solutions. Other competitors include a number of smaller companies,
which may have greater flexibility to address specific market needs, but less 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 higher barrier to entry in this market.
In the game console category, we compete primarily against Nvidia. Other competitors include Intel and
ARM.
Research and Development
We focus our research and development activities on improving and enhancing product design. One main
area of focus is on delivering the next generation of products with greater system level integration of the CPU
and GPU, improved system performance and performance-per-watt characteristics. For example, we are focusing
on improving the battery life of our microprocessors and APU products for mobile PCs and the power efficiency
of our microprocessors for servers. We are also focusing on delivering a range of low power integrated platforms
to serve key markets, including commercial clients, mobile computing, and gaming and media computing, as
well as developing a Heterogeneous System Architecture, which is designed for software developers to easily
program APUs by combining scalar processing on the CPU with parallel processing on the GPU, all while
providing high bandwidth access to memory at low power. We believe that these integrated platforms will bring
customers better time-to-market and increased performance and energy efficiency. We also work with industry
leaders on process technology, software and other functional intellectual property and we work with others in the
industry, public foundations, universities and industry consortia to conduct early stage research and development.
Our research and development expenses for 2011, 2010 and 2009 were approximately $1.5 billion, $1.4
billion and $1.7 billion, respectively. 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 products in the United States
with additional design and development engineering teams located in Canada, India, China, Singapore, Taiwan,
Germany, United Kingdom, Israel and Japan.
Manufacturing Arrangements and Assembly and Test Facilities
Third-Party Wafer Foundry Facilities
GLOBALFOUNDRIES, Inc. On March 2, 2009, together with Advanced Technology Investment Company
LLC (ATIC) and West Coast Hitech L.P., (WCH), acting through its general partner, West Coast Hitech G.P.,
Ltd., we formed GLOBALFOUNDRIES, Inc. (GF), a manufacturing joint venture that manufactures
semiconductor products and provides certain foundry services to us.
Wafer Supply Agreement. At the closing of the transactions, we entered into a Wafer Supply Agreement
(WSA), which governs the terms by which we purchase products manufactured by GF. Pursuant to the WSA, we
are required to purchase all of our microprocessor unit and APU product requirements from GF with limited
exceptions. On April 2, 2011, we amended the WSA. The primary effect of the amendment was to change the
pricing methodology applicable to wafers delivered in 2011 for our microprocessors, including APU products.
The amendment also modified our existing commitments regarding the production of certain GPU and chipset
products at GF. Pursuant to the amendment, GF committed to provide us with, and we committed to purchase, a
fixed number of 45nm and 32nm wafers per quarter in 2011. We paid GF a fixed price for 45nm wafers delivered
in 2011. Our price for 32nm wafers varied based on the wafer volumes and manufacturing yield of such wafers
and was based on good die. In addition, we also agreed to pay an additional quarterly amount to GF during 2012
totaling up to $430 million if GF met specified conditions related to continued availability of 32nm capacity as of
the beginning of 2012. Under the current terms of the WSA, in 2012, we will compensate GF on a cost plus basis
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