Advanced Micro Devices Inc's Comment on Supply Chain
We rely on third-party wafer foundries to fabricate the silicon wafers for all
of our products. We also rely on third-party providers to assemble, test, mark
and pack certain of our products. It is important to have reliable relationships
with all of these third-party manufacturing suppliers to ensure adequate product
supply to respond to customer demand.
We cannot assure you that these manufacturers or our other third-party manufacturing
suppliers will be able to meet our near-term or long-term manufacturing requirements.
If we experience supply constraints from our third-party manufacturing suppliers,
we may be required to allocate the affected products amongst our customers,
which could have a material adverse effect on our relationships with these customers
and on our financial condition. In addition, if we are unable to meet customer
demand due to fluctuating or late supply from our manufacturing suppliers, it
could result in lost sales and have a material adverse effect on our business.
We do not have long-term commitment contracts with some of our third-party
manufacturing suppliers. We obtain some of these manufacturing services on a
purchase order basis and these manufacturers are not required to provide us
with any specified minimum quantity of product beyond the quantities in an existing
purchase order. Accordingly, we depend on these suppliers to allocate to us
a portion of their manufacturing capacity sufficient to meet our needs, to produce
products of acceptable quality and at acceptable manufacturing yields and to
deliver those products to us on a timely basis and at acceptable prices. The
manufacturers we use also fabricate wafers and assemble, test and package products
for other companies, including certain of our competitors. They could choose
to prioritize capacity for other users, increase the prices that they charge
us on short notice or reduce or eliminate deliveries to us, which could have
a material adverse effect on our business.
Other risks associated with our dependence on third-party manufacturers include
limited control over delivery schedules and quality assurance, lack of capacity
in periods of excess demand, misappropriation of our intellectual property,
dependence on several small undercapitalized subcontractors and limited ability
to manage inventory and parts. Moreover, if any of our third-party manufacturing
suppliers suffer any damage to facilities, lose benefits under material agreements,
experience power outages, lack sufficient capacity to manufacture our products,
encounter financial difficulties, are unable to secure necessary raw materials
from their suppliers or suffer any other disruption or reduction in efficiency,
we may encounter supply delays or disruptions. If we are unable to secure sufficient
or reliable supplies of products, our ability to meet customer demand may be
adversely affected and this could materially affect our business.