AMD 2015 Annual Report Download - page 23

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Intel’s position in the microprocessor market and integrated graphics chipset market, its introduction of
competitive new products, 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.
We rely on GF to manufacture all of our microprocessor and APU products and a certain portion of our GPU
products, with limited exceptions. If GF is not able to satisfy our manufacturing requirements, our business
could be adversely impacted.
The WSA governs the terms by which we purchase products manufactured by GF. Pursuant to the WSA, we
are required to purchase all of our microprocessor and APU product requirements, and a certain portion of our
GPU product requirements, from GF with limited exceptions. If GF is unable to achieve anticipated
manufacturing yields, remain competitive using or implementing advanced leading-edge process technologies
needed to manufacture future generations of our products, manufacture our products on a timely basis at
competitive prices or meet our capacity requirements, then we may experience delays in product launches,
supply shortages for certain products or increased costs and our business could be materially adversely affected.
Additionally, if our requirements are less than the number of wafers that we committed to purchase, we
could have excess inventory or higher inventory unit costs, both of which may adversely impact our gross margin
and our results of operations.
We are currently in the process of negotiating a sixth amendment to the WSA, and we expect that our future
purchases from GF will continue to be material. If we do not successfully conclude our negotiations, it could
have a material adverse impact on our gross margin and our results of operations.
In addition, GF has relied on Mubadala Technology Investments LLC (Mubadala Tech) for its funding
needs. If Mubadala Tech fails to adequately fund GF on a timely basis, or at all, GF’s ability to manufacture
products for us could be materially adversely affected.
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 manufacturers 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 guarantee that these manufacturers or our other third-party manufacturing suppliers will be able
to meet our near-term or long-term manufacturing requirements. If we experience supply constraints from our
third-party manufacturing suppliers, 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, if we are unable to meet customer demand due to fluctuating or late supply from our
manufacturing suppliers, it could result in lost sales and have a material adverse effect on our business.
We do not have long-term commitment contracts with some of our third-party manufacturing suppliers. We
obtain some of these manufacturing services on a purchase order basis and these manufacturers are not required
to provide us with any specified minimum quantity of product beyond the quantities in an existing purchase
order. Accordingly, we depend on these suppliers to allocate to us a portion of their manufacturing capacity
sufficient to meet our needs, to produce products of acceptable quality and at acceptable manufacturing yields
and to deliver those products to us on a timely basis and at acceptable prices. The manufacturers we use also
fabricate wafers and assemble, test and package products for other companies, including certain of our
competitors. They could choose to prioritize capacity for other customers, increase the prices that they charge us
on short notice or reduce or eliminate deliveries to us, which could have a material adverse effect on our
business.
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