Crucial 2014 Annual Report Download - page 8

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In recent years, we have produced an increasingly broad portfolio of products, which enhances our ability to allocate
resources to our most profitable products but also increases the complexity of our manufacturing operations. Although our
product lines generally use similar manufacturing processes, our overall cost efficiency can be affected by frequent conversions
to new products, the allocation of manufacturing capacity to more complex, smaller-volume parts and the reallocation of
manufacturing capacity across various product lines.
Availability of Raw Materials
Our operations require raw materials that meet exacting standards. We generally have multiple sources of supply for our
raw materials. 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 and molding compound. Shortages
may occur from time to time in the future. We and/or our suppliers could be affected by laws and regulations enacted in
response to concerns regarding climate change, which could increase the cost and limit the supply of our raw materials. In
addition, disruptions in transportation lines 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 disrupted or our lead times extended, our business, results of
operations or financial condition could be materially adversely affected.
Marketing and Customers
Our products are sold into compute and graphics, mobile, SSD and other storage, automotive, industrial, medical and other
embedded and server markets. Market concentrations from 2014 net sales were approximately as follows: 30% for compute
and graphics (including desktop PCs, notebooks and workstations); 20% for mobile; 20% for SSD and other storage; 10% for
automotive, industrial, medical and other embedded; and 10% for server. Sales to Kingston, primarily DRAM, were 10% of
our net sales in 2014. Sales to Intel, primarily NAND Flash products through IM Flash, were 8% of our net sales in 2014, 10%
of our net sales in 2013 and 12% of our net sales in 2012. Sales to HP, primarily DRAM, were 9% of our net sales in 2014,
10% of our net sales in 2013 and 8% of our net sales in 2012.
Our semiconductor memory products are offered under the Micron, Lexar®, Crucial™, SpecTek® and Elpida brand names
and private labels. We market our semiconductor memory products primarily through our own direct sales force and maintain
sales or representative 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 through 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. 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.