Advanced Micro Devices

Legal and litigation · Product liability and warranty claims

Costs related to defective products could have a material adverse effect on us. Products as complex as those we offer may contain defects or failures when first introduced or when new versions or enhancements to existing products are released.

Legal and litigation · Litigation and legal proceedings

We are party to litigation and may become a party to other claims or litigation that could cause us to incur substantial costs or pay substantial damages or prohibit us from selling our products. From time to time, we are a defendant or plaintiff in various legal actions, as described in Note 18 - Contingencies of the Notes to our Consolidated Financial Statements.

Tax and financial reporting · Tax compliance and changes in tax law

Our business is subject to potential tax liabilities, and exposure to greater-than-anticipated income tax liabilities as a result of changes in tax rules and regulations, changes in interpretation of tax rules and regulations, or unfavorable assessments from tax audits, could affect our effective tax rates, financial condition, and results of operations.

Innovation and product development · Time to market and commercialization risks

The success of our business depends on our ability to introduce products on a timely basis with features and performance levels that provide value to our customers while supporting and coinciding with significant industry transitions. Our success depends to a significant extent on the development, qualification, implementation and acceptance of new product designs and improvements that provide value to our customers.

Customer and revenue · Customer concentration and key customer dependence

The loss of a significant customer may have a material adverse effect on us. We depend on a small number of customers for a substantial portion of our business, and we expect that a small number of customers will continue to account for a significant part of our revenue and receivables in the future.

Market position and competition · Market cyclicality and demand volatility

The semiconductor industry is highly cyclical and has experienced significant downturns, often in conjunction with constant and rapid technological change, wide fluctuations in supply and demand, continuous new product introductions, price erosion and declines in general economic conditions. We have incurred substantial losses in previous downturns, due to substantial declines in average selling prices; the cyclical nature of supply and demand imbalances in the semiconductor industry; a decline in demand for end-user products that incorporate our products; and excess inventory levels and periods of inventory adjustment.

Innovation and product development · Intellectual property protection and infringement

If we cannot adequately protect our technology or other intellectual property in the United States and abroad, through patents, copyrights, trade secrets, trademarks and other measures, we may lose a competitive advantage and incur significant expenses. We rely on a combination of protections provided by contracts, including confidentiality and nondisclosure agreements, copyrights, patents, trademarks and common law rights, such as trade secrets, to protect our intellectual property.

Core operations · Operational disruption and business continuity

Our business depends on the proper functioning of our internal business processes and information systems and modification or interruption of such systems may disrupt our business, processes and internal controls. We rely upon a number of internal business processes and information systems to support key business functions, and the efficient operation of these processes and systems is critical to our business.

Supply chain and procurement · Transportation and logistics disruption

We outsource to third parties certain supply-chain logistics functions, including portions of our product distribution, transportation management and information technology support services. We rely on third-party providers to operate our regional product distribution centers and to manage the transportation of our work-in-process and finished products among our facilities.

Core operations · Capacity utilization and efficiency

Failure to achieve expected manufacturing yields for our products could negatively impact our results of operations. Semiconductor manufacturing yields are a result of product design, process technology and packaging technology, which is typically proprietary to the manufacturer, and low yields can result from design failures, packaging technology failures, process technology failures or a combination of some or all of these.

Information management · Technology vendor dependence

We rely on third parties to manufacture our products, and if they are unable to do so on a timely basis in sufficient quantities and using competitive technologies, our business could be materially adversely affected. We utilize third-party wafer foundries to fabricate the silicon wafers for all of our products. We rely on Taiwan Semiconductor Manufacturing Company Limited (TSMC) for the production of all wafers for microprocessor and GPU products at 7 nanometer (nm) or smaller nodes.

Digital transformation and innovation · Artificial intelligence and automation

Issues related to the responsible use of AI may result in reputational, competitive and financial harm and liability. We offer products that include capabilities to support AI deployment and we expect this part of our business to grow. As with many new emerging technologies, AI presents risks and challenges and increasing legal, social and ethical concerns relating to its responsible use that could affect the adoption of AI, and thus our business.

Technology infrastructure · Technology systems and infrastructure failure

IT outages, data loss, data breaches and cyberattacks could disrupt operations and compromise our intellectual property or other sensitive information, be costly to remediate or cause significant damage to our business, reputation, financial condition and results of operations. Our business relies on technology hardware, software, cloud services, infrastructure, networks and systems (collectively, IT Systems).

Natural and catastrophic events · Climate change and environmental impact

Climate change may have a long-term impact on our business. Climate change may have an adverse impact on our business and the business of our suppliers and customers. Global climate change may result in certain natural disasters and climate-related events occurring with increasing frequency and severity and its physical impact on the major regions where we have operations has the potential to disrupt our business and those of our customers and suppliers.

Geopolitical and trade · Trade policies tariffs and sanctions

Government actions and regulations such as export regulations, tariffs, and trade protection measures may limit our ability to export our products to certain customers. We have equity interests in two joint ventures (collectively, the THATIC JV) with Higon Information Technology Co., Ltd. (THATIC), a third-party Chinese entity. In June 2019, the Bureau of Industry and Security (BIS) of the United States Department of Commerce added certain Chinese entities to the Entity List, including THATIC and the THATIC JV.

International and currency · Foreign exchange and currency exposure

Unfavorable currency exchange rate fluctuations could adversely affect us. We have costs, assets and liabilities that are denominated in foreign currencies. As a consequence, movements in exchange rates could cause our foreign currency denominated expenses to increase as a percentage of revenue, affecting our profitability and cash flows.

International and currency · International operations and emerging markets

Our worldwide operations are subject to political, legal and economic risks and natural disasters, which could have a material adverse effect on us. We maintain operations around the world, including in the United States, Canada, Europe, Australia, Latin America and Asia. We rely on third-party wafer foundries in the United States, Europe and Asia.

Credit and liquidity · Debt service and covenant compliance

The agreements governing our notes, our guarantee of the Assumed Xilinx Notes, and our Revolving Credit Agreement impose restrictions on us that may adversely affect our ability to operate our business. The indenture governing our 3.924% Senior Notes due 2032 and 4.393% Senior Notes due 2052 contains various covenants that limit our ability to, among other things: create liens on certain assets to secure debt, enter into certain sale and leaseback transactions.

Market and investment · Asset valuation and impairment

Any impairment of our tangible, definite-lived intangible or indefinite-lived intangible assets, including goodwill, may adversely impact our financial position and results of operations. We account for certain acquisitions, including the Xilinx, Inc. (Xilinx), Pensando Systems Inc. (Pensando) and Silo AI acquisitions, using the acquisition method of accounting under the provisions of ASC 805, Business Combinations.

Reputation and brand · Corporate social responsibility

Evolving expectations from governments, investors, customers and other stakeholders regarding corporate responsibility matters could result in additional costs, harm to our reputation and a loss of customers. There are evolving expectations from governments, investors, customers and other stakeholders regarding corporate responsibility matters including those involving the environment and climate, energy and water consumption, diversity and inclusion, human rights and cybersecurity.