AMD 2011 Annual Report Download - page 30

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The semiconductor industry is highly cyclical and has experienced severe downturns that materially adversely
affected, and may in the future materially adversely affect, our business.
The semiconductor industry is highly cyclical and has experienced significant downturns, often in
conjunction with constant and rapid technological change, wide fluctuations in supply and demand, continuous
new product introductions, price erosion and declines in general economic conditions. We have incurred
substantial losses in recent downturns, due to:
• substantial declines in average selling prices;
• the cyclical nature of supply/demand imbalances in the semiconductor industry;
• a decline in demand for end-user products (such as PCs) that incorporate our products; and
• excess inventory levels in the channels of distribution, including those of our customers.
Global economic uncertainty and weakness have also impacted the semiconductor market as consumers and
businesses have deferred purchases, which negatively impacted demand for our products. Recent flooding in
Thailand is disrupting the supply of hard disk drives. If our customers are unable to obtain sufficient quantities of
hard disk drives they need for their systems that include our products and the supply of their products is
substantially reduced, then they may postpone or cancel their orders for our products, which could also have a
material adverse impact on our business. For example, during the fourth quarter of 2011, we believe the results of
our Graphics segment were adversely impacted because some of our customers were impacted by the flooding in
Thailand and the disruption in the supply of hard disk drives. We expect the hard disk drive shortage to continue
through at least the first quarter of 2012, which could have a material adverse impact on our business. Our
financial performance has been, and may in the future be, negatively affected by these downturns.
The demand for our products depends in part on the market conditions in the industries and geographies into
which they are sold. Fluctuations in demand for our products or a market decline in any of these industries or
geographies would have a material adverse effect on our results of operations.
Our business is dependent upon the market for desktop and mobile PCs and servers. Over the past three
years, form factors have steadily shifted from desktop PCs to mobile PCs, and we expect that this trajectory will
continue and extend to include additional form factors like tablets and slates. Historically, a significant portion of
our Computing Solutions revenue has been related to desktop PCs. Industry-wide fluctuations in the computer
marketplace have materially adversely affected us in the past and may materially adversely affect us in the future.
As a result of ongoing macroeconomic challenges affecting the global economy, end-user demand for PCs and
servers remains unpredictable.
The growth of our business is also dependent on continued demand for our products from high-growth,
emerging global markets. In addition, our ability to be successful in such markets depends in part on our ability
to establish adequate local infrastructure, as well as our ability to cultivate and maintain local relationships in
these markets. If demand from these markets is below our expectations, sales of our products may decrease,
which would have a material adverse effect on us.
Our operating results are subject to quarterly and seasonal sales patterns.
A substantial portion of our quarterly sales have historically been made in the last month of the quarter. This
uneven sales pattern makes prediction of revenues for each financial period difficult and increases the risk of
unanticipated variations in quarterly results and financial condition. In addition, our operating results tend to vary
seasonally. For example, historically, demand in the retail sector of the PC market is often stronger during the
fourth quarter as a result of the winter holiday season and weaker in the first quarter. European sales have also
been historically weaker during the summer months. Many of the factors that create and affect seasonal trends
are beyond our control.
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