Adaptec 2007 Annual Report Download - page 27

Table of Contents
the future experience, defects and bugs in our products. If any of our products contain defects or bugs, or have reliability, quality or compatibility problems that
are significant to our customers, our reputation may be damaged and customers may be reluctant to buy our products. This could materially and adversely affect
our ability to retain existing customers or attract new customers. In addition, these defects or bugs could interrupt or delay sales to our customers.
We may have to invest significant capital and other resources to alleviate problems with our products. If any of these problems are not found until after we
have commenced commercial production of a new product, we may be required to incur additional development costs and product recall, repair or replacement
costs. These problems may also result in claims against us by our customers or others. In addition, these problems may divert our technical and other resources
from other development efforts. Moreover, we would likely lose, or experience a delay in, market acceptance of the affected product or products, and we could
lose credibility with our current and prospective customers.
Our business may be adversely affected if our customers or suppliers cannot obtain sufficient supplies of other components needed in their product
offerings to meet their production projections and target quantities.
Some of our products are used by customers in conjunction with a number of other components, such as transceivers, microcontrollers and digital signal
processors. If, for any reason, our customers experience a shortage of any component, their ability to produce the forecasted quantity of their product offerings
may be affected adversely and our product sales would decline until the shortage is remedied. Such a situation could harm our operating results, cash flow and
financial condition.
We rely on limited sources of wafer fabrication, the loss of which could delay and limit our product shipments.
We do not own or operate a wafer fabrication facility. Two outside wafer foundries supply more than 95% of our semiconductor wafer requirements. Our
wafer foundry suppliers also make products for other companies and some make products for themselves, thus we may not have access to adequate capacity or
certain process technologies. We have less control over delivery schedules, manufacturing yields and costs than competitors with their own fabrication facilities.
If the wafer foundries we use are unable or unwilling to manufacture our products in required volumes, or at specified times, we may have to identify and qualify
acceptable additional or alternative foundries. This qualification process could take six months or longer. We may not find sufficient capacity quickly enough, if
ever, at an acceptable cost, to satisfy our production requirements.
Some companies that supply our customers are similarly dependent on a limited number of suppliers to produce their products. These other companies’
products may be designed into the same networking equipment into which our products are designed. Our order levels could be reduced materially if these
companies are unable to access sufficient production capacity to produce in volumes demanded by our customers because our customers may be forced to slow
down or halt production on the equipment into which our products are designed.
21
Source: PMC SIERRA INC, 10-K, February 22, 2008