Crucial 2011 Annual Report Download - page 9

Availability of Raw Materials
Our production processes require raw materials that meet exacting standards, including several that are customized for, or are unique to,
us. We generally have multiple sources and sufficient availability of supply. However, only a limited number of suppliers are capable of
delivering certain raw materials that meet our standards. In some cases, materials are provided by a single supplier. Various factors could reduce
the availability of raw materials such as silicon wafers, photomasks, chemicals, gases, photoresist, lead frames, molding compound and other
materials. Shortages may occur from time to time in the future. In addition, transportation problems could delay our receipt of raw
materials. Lead times for the supply of raw materials have been extended in the past. If our supply of raw materials is interrupted or our lead
times extended, our results of operations or financial condition could be adversely affected.
Marketing and Customers
Our products are sold into computing, consumer, networking, telecommunications, automotive, industrial and imaging markets. Market
concentrations from 2011 net sales were approximately as follows: computing (including desktop PCs, servers, notebooks and workstations),
30% ; mobile, 25% ; consumer electronics, 15% ; and networking and storage, 15% . Sales to Intel, primarily of NAND Flash from our IM Flash
joint ventures, were 10% of our net sales in 2011, 9% of our net sales in 2010, and 20% of our net sales in 2009. Sales to Hewlett
-Packard
Company, primarily of DRAM, were 9% of our net sales in 2011 and 13% of our net sales in 2010.
Our semiconductor memory products are offered under the Micron, Lexar®, Crucial™, SpecTek® and Numonyx® brand names and private
labels. We market our semiconductor memory products primarily through our own direct sales force and maintain sales offices in our primary
markets around the world. We sell Lexar-branded NAND Flash memory products primarily through retail channels and our Crucial™-branded
products through a web-based customer direct sales channel as well as channel and distribution partners. Our products are also offered through
independent sales representatives and distributors. Independent sales representatives obtain orders subject to final acceptance by us and are
compensated on a commission basis. We make shipments against these orders directly to the customer. Distributors carry our products in
inventory and typically sell a variety of other semiconductor products, including competitors' products. We maintain inventory at locations in
close proximity to certain key customers to facilitate rapid delivery of products.
We offer products designed to meet the diverse needs of computing, server, automotive, networking, commercial/industrial, consumer
electronics, mobile, embedded, security and medical applications. Many of our customers require a thorough review or qualification of
semiconductor products, which may take several months.
Backlog
Because of volatile industry conditions, customers are reluctant to enter into long-term, fixed-price contracts. Accordingly, new order
volumes for our semiconductor products fluctuate significantly. We typically accept orders with acknowledgment that the terms may be adjusted
to reflect market conditions at the date of shipment. For these reasons, we do not believe that our order backlog as of any particular date is a
reliable indicator of actual sales for any succeeding period.
Product Warranty
Because the design and manufacturing process for semiconductor products is highly complex, it is possible that we may produce products that
do not comply with customer specifications, contain defects or are otherwise incompatible with end uses. In accordance with industry practice,
we generally provide a limited warranty that our products are in compliance with our specifications existing at the time of delivery. Under our
general terms and conditions of sale, liability for certain failures of product during a stated warranty period is usually limited to repair or
replacement of defective items or return of, or a credit with respect to, amounts paid for such items. Under certain circumstances, we provide
more extensive limited warranty coverage than that provided under our general terms and conditions.
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