10-KPeriod: FY2001

ADVANCED MICRO DEVICES INC Annual Report, Year Ended Dec 30, 2001

Filed March 7, 2002For Securities:AMD

Summary

This 10-K filing for Advanced Micro Devices, Inc. (AMD) for the fiscal year ending December 29, 2001, highlights a company heavily invested in the competitive microprocessor and Flash memory markets. Despite facing significant competition, particularly from Intel in the microprocessor space, AMD is focusing on its seventh-generation processors (Athlon and Duron) and its upcoming eighth-generation 'Hammer' processors, which are designed for 64-bit computing and aim to compete in both high-end workstations/servers and desktop markets. The company is also active in the Flash memory market, though it anticipates increased competition. AMD's manufacturing strategy involves a mix of owned facilities (including significant investment in Dresden Fab 30) and joint ventures (FASL with Fujitsu), alongside foundry arrangements. The company emphasizes continued significant investment in research and development to maintain technological competitiveness and achieve higher performance and lower costs. Strategic partnerships and acquisitions, such as the recent acquisition of Alchemy Semiconductor, are also key to its growth strategy.

Key Highlights

  • 1AMD is heavily reliant on its 'Core Products' segment, which accounted for 97% of net sales in 2001, primarily driven by PC processors (AMD Athlon and Duron).
  • 2The company is preparing for the introduction of its eighth-generation 'Hammer' microprocessors, planned for late 2002, which will support 64-bit computing for both high-end and mainstream PC users.
  • 3Significant investment in R&D continues, with $651 million spent in 2001 (17% of net sales), crucial for staying competitive against industry leaders like Intel.
  • 4AMD's manufacturing strategy includes substantial investment in its Dresden Fab 30 facility and a joint venture, FASL, with Fujitsu for Flash memory production.
  • 5The company acknowledges the dominant market position of Intel in the microprocessor sector, detailing Intel's aggressive strategies and AMD's efforts to foster third-party partnerships for chipsets and motherboards.
  • 6AMD anticipates increased competition in the Flash memory market in 2002 and beyond.
  • 7The recent acquisition of Alchemy Semiconductor in February 2002 signals a strategic move into low-power microprocessors for personal connectivity devices.

Frequently Asked Questions

In 2001, AMD's business was primarily driven by its 'Core Products' segment, which generated 97% of net sales ($3.8 billion). This segment includes PC processors (like AMD Athlon and Duron), memory products (Flash memory and EPROMs), and other IC products such as embedded processors, chipsets, and networking products. The 'Foundry Services' segment contributed the remaining 3% of net sales ($98 million).

AMD is focusing on technological advancement and product differentiation. This includes the development of its seventh-generation processors (Athlon and Duron) and the upcoming eighth-generation 'Hammer' processors, designed for 64-bit capabilities. The company also emphasizes close relationships with third-party designers and manufacturers of complementary products like chipsets and motherboards, as AMD's processors are not compatible with Intel's platform standards. However, AMD acknowledges Intel's dominant market position and aggressive competitive tactics.

AMD operates a mix of its own manufacturing facilities, including significant ongoing investment in Dresden Fab 30, and joint ventures, such as the FASL facility with Fujitsu for Flash memory. The company also utilizes foundry arrangements. AMD plans substantial capital expenditures to support its microprocessor and Flash memory product lines, underscoring the importance of advanced process technologies for product performance and cost competitiveness.

The acquisition of Alchemy Semiconductor, Inc. in February 2002 is a strategic move to expand AMD's reach into the growing market for low-power, high-performance microprocessors designed for personal connectivity devices like PDAs and web tablets. This acquisition will form the basis of AMD's new Personal Connectivity Solutions group.