Crucial 2015 Annual Report Download - page 8

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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 and increase
the cost 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 2015 net sales were approximately as follows: 25% for
compute and graphics (including desktop PCs, notebooks, and workstations); 25% for mobile; 20% for SSD and other storage;
15% for server; and 10% for automotive, industrial, medical, and other embedded. Sales to Kingston, primarily DRAM, were
11% of our net sales in 2015 and 10% of our net sales in 2014. Sales to Intel, primarily NAND Flash products through IMFT
were 8% of our net sales in 2015, 8% of our net sales in 2014, and 10% of our net sales in 2013. Sales to HP, primarily
DRAM, were 7% of our net sales in 2015, 9% of our net sales in 2014, and 10% of our net sales in 2013.
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.
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.