AMD 2011 Annual Report Download - page 23

ITEM 1A. RISK FACTORS
The risks and uncertainties described below are not the only ones we face. If any of the following risks actually
occurs, our business, financial condition or results of operations could be materially adversely affected. In addition,
you should consider the interrelationship and compounding effects of two or more risks occurring simultaneously.
Intel Corporation’s dominance of the microprocessor market and its aggressive business practices may limit
our ability to compete effectively.
Intel Corporation has dominated the market for microprocessors for many years. Intel’s market share,
margins 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 a lower average
selling price 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 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 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 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. The continued improvement of the quality of
Intel’s integrated graphics, along with higher unit shipments of our APU products, may drive computer
manufacturers to reduce the number of systems they build paired with discrete graphics components, particularly
for mobile PCs, because they may offer satisfactory graphics performance for most mainstream PC users, at a
lower cost. 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.
As long as Intel remains in this dominant position, we may be materially adversely affected by Intel’s:
• business practices, including rebating and allocation strategies and pricing actions, designed to limit our
market share and margins;
• product mix and introduction schedules;
• product bundling, marketing and merchandising strategies;
• exclusivity payments to its current and potential customers and channel partners;
• control over industry standards, PC manufacturers and other PC industry participants, including
motherboard, memory, chipset and basic input/output system, or BIOS, suppliers and software
companies as well as the graphics interface for Intel platforms; and
• marketing and advertising expenditures in support of positioning the Intel brand over the brand of its
OEM customers.
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