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8
Additionally, to encourage software title developers and publishers to develop games optimized for platforms utilizing
our products and enterprise applications optimized for our GPUs, we seek to establish and maintain strong relationships in
the software development community. Engineering and marketing personnel interact with and visit key software developers
to promote and discuss our products, as well as to ascertain product requirements and solve technical problems. Our developer
program makes certain that our products are available to developers prior to volume availability in order to encourage the
development of software applications and game titles that are optimized for our products.
Backlog
Our sales are primarily made pursuant to standard purchase orders. The quantity of products purchased by our customers
as well as our shipment schedules are subject to revisions that reflect changes in both the customers' requirements and in
manufacturing availability. The semiconductor industry is characterized by short lead time orders and quick delivery
schedules. In light of industry practice and experience, we believe that only a small portion of our backlog is non-cancelable
and that the dollar amount associated with the non-cancelable portion is not significant.
Seasonality
Our GPU and Tegra processor products serve many markets from consumer PC gaming to enterprise workstations to
government and service provider cloud datacenters; however, a majority of our revenue is consumer focused. Our consumer
products have typically seen stronger revenue in the second half of our fiscal year. However, there can be no assurance that
this trend will continue.
Manufacturing
We do not directly manufacture semiconductor wafers used for our products. Instead, we utilize what is known as a
fabless manufacturing strategy for all of our product-line operating segments whereby we employ world-class suppliers for
all phases of the manufacturing process, including wafer fabrication, assembly, testing and packaging. This strategy uses
the expertise of industry-leading suppliers that are certified by the International Organization for Standardization in such
areas as fabrication, assembly, quality control and assurance, reliability and testing. In addition, this strategy allows us to
avoid many of the significant costs and risks associated with owning and operating manufacturing operations. Our suppliers
are also responsible for procurement of most of the raw materials used in the production of our products. As a result, we
can focus our resources on product design, additional quality assurance, marketing and customer support.
We utilize industry-leading suppliers, such as Taiwan Semiconductor Manufacturing Company Limited and Samsung
Electronics Co. Ltd, to produce our semiconductor wafers. We then utilize independent subcontractors, such as Advanced
Semiconductor Engineering, Inc., BYD Auto Co. Ltd., Hon Hai Precision Industry Co., Ltd., JSI Logistics Ltd., King Yuan
Electronics Co., Ltd. and Siliconware Precision Industries Company Ltd. to perform assembly, testing and packaging of
most of our products. We purchase substrates from IbidenCo., Ltd., Nanya Technology Corporation, and Unimicron
Technology Corporation.
We typically receive semiconductor products from our subcontractors, perform incoming quality assurance and then
ship the semiconductors to contract equipment manufacturers, or CEMs, distributors, motherboard and AIB customers from
our third-party warehouse in Hong Kong. Generally, these manufacturers assemble and test the boards based on our design
kit and test specifications, and then ship our products to retailers, system builders or OEMs as motherboard and add-in
board solutions.
Working Capital
We focus considerable attention on managing our inventories and other working-capital-related items. We manage
inventories by communicating with our customers and then using our industry experience to forecast demand on a product-
by-product basis. We then place manufacturing orders for our products that are based on forecasted demand. The quantity
of products actually purchased by our customers as well as shipment schedules are subject to revisions that reflect changes