AMD 2012 Annual Report Download - page 30

On December 6, 2012, we entered into a third amendment to the WSA with GF. Pursuant to the third
amendment, we modified our wafer purchase commitments for the fourth quarter of 2012 under the second
amendment to the WSA. In addition, we agreed to certain pricing and other terms of the WSA applicable to
wafers for our microprocessor and APU products to be delivered by GF to us during 2013 and through
December 31, 2013. Pursuant to the third amendment, we committed to purchase a fixed number of production
wafers at negotiated prices in the fourth quarter of 2012 and through December 31, 2013. If GF encounters any
problems that significantly reduce the number of functional die we receive from each wafer, then under our fixed
wafer price arrangement, this will have the effect of increasing our per-unit cost for our products and could also
reduce the number of products available for sale to our customers, which may have an adverse impact on our
results of operations. In addition, if our requirements are less than the fixed number of wafers that we agreed to
purchase, we could have excess inventory or higher inventory unit costs, both of which will adversely impact our
gross margin and our results of operations.
In addition, GF relies on Advanced Technology Investment Company (ATIC) for its funding needs. If ATIC
fails to adequately fund GF on a timely basis, or at all, GF’s ability to manufacture products for us would be
materially adversely affected.
Failure to achieve expected manufacturing yields for our products could negatively impact our financial
results.
Semiconductor manufacturing yields are a result of both product design and process technology, which is
typically proprietary to the manufacturer, and low yields can result from design failures, process technology
failures, or a combination of both. Our third-party foundries are responsible for the process technologies used to
fabricate silicon wafers. If our third-party foundries experience manufacturing inefficiencies or encounter
disruptions, errors or difficulties during production, we may fail to achieve acceptable yields or experience
product delivery delays. We cannot be certain that our third-party foundries will be able to develop, obtain or
successfully implement leading-edge process technologies needed to manufacture future generations of our
products profitably or on a timely basis or that our competitors will not develop new technologies, products or
processes earlier. Moreover, during periods when foundries are implementing new process technologies, their
manufacturing facilities may not be fully productive. A substantial delay in the technology transitions to smaller
process technologies could have a material adverse effect on us, particularly if our competitors transition to more
cost effective technologies before us. Any decrease in manufacturing yields could result in an increase in per unit
costs, which would adversely impact our gross margin and/or force us to allocate our reduced product supply
amongst our customers, which could harm our relationships with our customers and reputation and materially
adversely affect our business.
We may not be able to successfully implement our long-term business strategy.
We are implementing a long-term business strategy to refocus our business to address markets beyond our
core, PC market to the faster growing low power or dense server, embedded, and ultraportable and ultra-low-
power markets. Currently, approximately 85% of our business is focused on the legacy PC portions of the
market, projected to have slowing growth over the next several years. The goal of our long-term strategy is to
drive 40% to 50% of our portfolio to faster growth markets in the long term. Despite our efforts, we may not be
able to implement our strategy in a timely manner to exploit potential market opportunities or meet competitive
challenges. Moreover, our business strategy is dependent on creating products that anticipate customer
requirements and emerging industry trends. There can be no assurances that our new strategic direction will
result in innovative products and technologies that provide value to our customers. In addition, we may be
entering markets where current and new competitors may be able to adapt more quickly to customer
requirements and emerging technologies. We cannot assure you that we will be able to compete successfully
against current or new competitors who may have stronger positions in these new markets. We may face delays
or disruptions in research and development efforts, or we may be required to significantly invest greater
resources in research and development than anticipated.
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