AMD 2011 Annual Report Download - page 24

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 features
and performance levels that provide value to our customers while supporting and coinciding 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, qualify and distribute 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. If we fail to or are delayed in developing, qualifying or shipping 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, qualifying or shipping 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
reductions. The introduction of new products and enhancements to existing products is necessary to maintain an
overall corporate average selling price. If we are unable to introduce new products with sufficient increases in
average selling price or increased unit sales volumes capable of offsetting the reductions in the average selling
price of existing products, our business could be materially adversely affected.
With the introduction of our APU products, computer manufacturers have increasingly selected APUs for
their AMD product-based solutions, particularly for mobile PCs, because the APU platforms cost less than the
combined cost of a legacy microprocessor, discrete graphics card and chipset, while offering comparable
performance to mainstream discrete graphics cards, which we believe is sufficient for most mainstream PC users.
We believe that demand for additional discrete graphic cards may decrease in the future due to both the
continued improvement of the quality of Intel’s integrated graphics and the discrete level graphics performance
of our APUs.
We rely on third parties to manufacture our products, and if they are unable to do so on a timely basis in
sufficient quantities and using competitive technologies, our business could be materially adversely affected.
We rely on third party wafer foundries to fabricate the silicon wafers for all of our products. We also rely on
third party providers to assemble, test, mark and pack certain of our products. It is important to have reliable
relationships with all of these third party manufacturing suppliers to ensure adequate product supply to respond
to customer demand.
We cannot assure you that these manufacturers or our other third party manufacturing suppliers will be able
to meet our near-term or long-term manufacturing requirements. For example, during the fourth quarter of 2011,
we experienced reduced supply of 45nm products from GF because of a manufacturing disruption that reduced
the number of 45nm wafers available for production. If we experience future supply constraints, such as was the
case with GF in the second half of 2011, we may be required to allocate the affected products amongst our
customers, which could have a material adverse effect on our relationships with these customers and on our
financial condition. In addition, depending on the timing of supply of products during any given quarter,
customer demand may fluctuate.
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