NVIDIA 2015 Annual Report Download - page 94

14
System security and data protection breaches, as well as cyber-attacks, could disrupt our operations, reduce our expected
revenue and increase our expenses, which could adversely affect our stock price and damage our reputation.
Security breaches, computer malware and cyber-attacks have become more prevalent and sophisticated in recent years.
These attacks have occurred on our systems in the past and may occur in the future. Experienced computer programmers,
hackers and employees may be able to penetrate our security controls and misappropriate or compromise our confidential
information, or that of our employees or third parties. These attacks may create system disruptions or cause shutdowns.
These hackers may also develop and deploy viruses, worms and other malicious software programs that attack or otherwise
exploit security vulnerabilities in our products. For portions of our IT infrastructure, including business management and
communication software products, we rely on products and services provided by third parties. These providers may also
experience breaches and attacks to their products which may impact our systems. Data security breaches may also result
from non-technical means, such as actions by an employee with access to our systems.
Actual or perceived breaches of our security measures or the accidental loss, inadvertent disclosure or unapproved
dissemination of proprietary information or sensitive or confidential data about us, our partners, our customers or third
parties could expose us, our partners, our customers, third parties or the individuals affected, to a risk of loss or misuse of
this information, resulting in litigation and potential liability, damage to our brand and reputation or other harm to our
business. Our efforts to prevent and overcome these challenges could increase our expenses and may not be successful. We
may experience interruptions, delays, cessation of service and loss of existing or potential customers. Such disruptions could
adversely impact our ability to fulfill orders and interrupt other critical functions. Delayed sales, lower margins or lost
customers as a result of these disruptions could adversely affect our financial results, stock price and reputation.
We depend on third parties and their technology to manufacture, assemble, test and/or package our products, which
reduces our control over product quantity and quality, development, enhancement and product delivery schedule and
could harm our business.
We do not manufacture the silicon wafers used for our GPUs and Tegra processors and do not own or operate a wafer
fabrication facility. Instead, we are dependent on industry-leading foundries, such as Taiwan Semiconductor Manufacturing
Company Limited and Samsung Electronics Co. Ltd., to manufacture our semiconductor wafers using their fabrication
equipment and techniques. Similarly, we do not assemble, test or package our products, but instead rely on 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. and Siliconware Precision Industries Co. Ltd. We do not have long-
term commitment contracts with these foundries or subcontractors. As a result, we face several significant risks which
could have an adverse effect on our ability to meet customer demands and/or negatively impact our business operations,
gross margin, revenue and/or financial results, including:
• a lack of guaranteed supply of wafers and other components and potential higher wafer and component prices due
to supply constraints;
• a failure by our foundries to procure raw materials or to provide or allocate adequate manufacturing or test capacity
for our products;
• a failure to develop, obtain or successfully implement high quality, leading-edge process technologies, including
transitions to smaller geometry process technologies, needed to manufacture our products profitably or on a timely
basis;
• loss of a supplier and additional expense and/or production delays as a result of qualifying a new foundry or
subcontractor and commencing volume production or testing in the event of a loss of or a decision to add or change
a supplier;
• a lack of direct control over delivery schedules or product quantity and quality; and