AMD 2013 Annual Report Download - page 32

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The loss of a significant customer may have a material adverse effect on us.
Collectively, our top five customers accounted for approximately 54% of our net revenue in 2013. On a
segment basis, in 2013, five customers accounted for approximately 58% of the net revenue of our Computing
Solutions segment and five customers accounted for approximately 70% of the net revenue of our Graphics and
Visual Solutions segment. We expect that a small number of customers will continue to account for a substantial
part of revenues of our businesses in the future. If one of our key customers decides to stop buying our products,
or if one of these customers materially reduces its operations or its demand for our products, our business would
be materially adversely affected.
Our receipt of revenue from our semi-custom SOC products is dependent upon our technology being designed
into third-party products and the success of those products.
The revenue that we receive from our semi-custom SOC products is in the form of non-recurring
engineering fees charged to third parties for design and development services and revenue received in connection
with sales of our semi-custom SOC products to these third parties. As a result, our ability to generate revenue
from our semi-custom products depends on our ability to secure customers for our semi-custom design pipeline.
We also receive royalties paid to us by third parties in connection with sales of their products that incorporate our
technology. Any revenue from sales of our semi-custom SOC products and any royalty revenue is directly related
to sales of the third-party’s products and reflective of their success in the market. Moreover, we have no control
over the marketing efforts of these third parties, and we cannot make any assurances that sales of their products
will be successful in current or future years. Consequently, the semi-custom SOC product and royalty revenue
expected by us may not be fully realized, and our operating results may be adversely affected. In addition, we
expect that as we continue to transition to a semi-custom business model, royalties paid to us by third parties in
connection with sales of their products that incorporate our technology will decline.
The demand for our products depends in part on the market conditions in the industries into which they are
sold. Fluctuations in demand for our products or a market decline in any of these industries could have a
material adverse effect on our results of operations.
A significant portion of our business is currently dependent upon the market for desktop PCs and notebooks.
Form factors have increasingly shifted from desktop PCs and notebooks to tablets, with tablets being one of the
fastest growing form factors. Historically, a significant portion of our Computing Solutions revenue has been
related to desktop PCs. Currently, a significant portion of our business is focused on the consumer PC portions of
the market, and we believe that PC market conditions will remain challenging. Industry-wide fluctuations in the
computer marketplace have materially adversely affected us in the past and may materially adversely affect us in
the future. For example, our net revenue in the second half of 2012 and 2013 was adversely affected, in part, by
the overall weakness in the global economy and weak consumer demand for end-user PC products, which
impacted sales.
In addition, during the third and fourth quarter of 2013, we ramped sales of our semi-custom SOC products.
Specifically, in the third and fourth quarters of 2013, net revenue from sales of our semi-custom SOC and
embedded products represented more than 30% of total net revenue. The success of our semi-custom SOC
products is dependent on securing customers for our semi-custom design pipeline and consumer market
conditions, including the success of the Sony PlayStation®4 and Microsoft Xbox One game console systems.
Our ability to design and introduce new products in a timely manner is dependent upon third-party intellectual
property.
In the design and development of new products and product enhancements, we rely on third-party
intellectual property such as software development tools and hardware testing tools. Furthermore, certain product
features may rely on intellectual property acquired from third parties. The design requirements necessary to meet
consumer demand for more features and greater functionality from semiconductor products may exceed the
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