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The Competition

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TABLE OF CONTENTS

The Competition
Who competes against AMD flash memory products?
Who competes against AMD processors?
What chipsets compete with AMD PC chipsets?

The Risks
There are no questions in this section, but there is material there.

The Rewards
What will the stock price be in xx/xx?

MISC STUFF


The Competition

It is difficult to size up competition in the cutthroat, fast-paced world of semiconductors. Companies can be partners one day, and fierce competitors the very next. Or they might be competitors and partners at the same time. This FAQ will try its best to examine AMD's competition.

Who competes against AMD flash memory products?
Intel, Sharp, Toshiba, and STMicro primarily. The latest (2000 to 2001) market share numbers are available:
http://boards.fool.com/Message.asp?mid=17115196

Who competes against AMD processors?
AMD's primary competitor is Intel Corp. Comparisons between chips can be found on sites cited previously in this FAQ. Additionally, Via Technologies acquired Cyrix National Semiconductor and IDT/Centaurand is now making low-cost, low-end processors. Transmeta, with its unique code morphing software was once thought to be a major new comer; however, they have been plagued with performance and production difficulties. As such, Transmeta is essentially limited to the power conscious segment of the mobile market, where Intel currently competes ferociously, and where AMD soon plans to make an entrance. There are also numerous competitors for the embedded chip market including National Semiconductor, Intel, IBM, Motorola, HP, Cypress, Fujitsu, Hitachi, and others. Since AMD's purchase of Alchemy brought them a MIPS license, all ARM based products (the majority of the market place) could wind up in direct competition with AMD and MIPS based technology. The majority of companies listed on the Philadelphia Semiconductor Index make embedded processors which also may compete directly with AMD's offerings.

What chipsets compete with AMD PC chipsets?
AMD is not directly involved in the chipset business, which means no one really competes directly with them in the chipset market. AMD has on occasion released in house chipsets to help the launch of new products aimed at providing basic functionality with high reliability. AMD appears to have some limited plans with regards to their newly announced Opteron platform- this may help them in the higher ends of the market.

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THE RISK

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AMD, like any other company, has risks associated with its business. The most visible to many AMD Fools is that the company will be depending on third party vendors for its PC processor chipsets. Making microprocessors is an extremely complicated task, requires thousands of man-hours of product development, testing, implementation, more testing, bug fixing, marketing, and third party support. Any number of glitches, mistakes, or natural events (disasters) could materially and adversely impact the company. For full disclosure, AMD's annual report is a good source of information.

PROCESS TECHNOLOGY

Process technology is very important for any company in the semiconductor industry because it directly impacts yields, volumes, costs, and eventually profits. It is capital intensive to maintain process parity and more intensive to reach a position of process technology leadership. Moving to smaller process technologies presents significant risks for AMD (.13 micron and smaller). Any delays or imperfections during transitions could materially and adversely affect the company.

LICENSING AGREEMENTS

AMD licenses a lot of technology with Intel, and is vulnerable to litigation should disagreements arise. Any legal action against AMD that is successful by Intel would jeopardize AMD's ability to remain a going concern. AMD also relies on development partners, like Motorola and IBM, for the exchange of IP and process technology. The working relationship among all partners is critical to AMD's success in the market place.

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THE REWARD

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This is too unpredictable to belong in a FAQ. Nevertheless, let's look at things like this:

AMD is increasing capacity, whether the market grows or not. The more units AMD can sell at a reasonable Average Selling Price, the more profitable the company can be. Currently, AMD has the capacity to sell at least 8 million CPUs per quarter in the market place, or some 32 million units per year. When AMD finishes the transition to the .13-micron process and brings online foundry capacity as arranged with UMC, AMD will be able to produce 12 million CPUs per quarter, or 48 million CPUs per year. Since AMD is attempting to reduce costs as much as possible, the ASP for each process generation need remain only flat to increase margins. Blah, blah, blah.

With Fab 35 due online in 2005, AMD will be in the ballpark of 75 million to 90 million CPUs per year of capacity. IF they can sell this much product, AMD will make a lot of money, regardless of whether or not Flash adds to or subtracts from the bottom line.

The reward, then, is that AMD is well positioned for strong growth if a lot of things go right. It's up to you to develop your own investing strategy. But the long-term prospects look good (with the standard disclaimers).


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MISCELLANEOUS STUFF

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Company Webpages

AMD homepage
http://www.amd.com/

Intel homepage
http://www.intel.com/

Microsoft homepage
http://www.microsoft.com/

VIA homepage
http://www.via.com.tw/

NVidia homepage
http://www.nvidia.com

Gaming Resources
http://www.bluesnews.com/
http://www.voodooextreme.com/

Investment news/bulletin boards
http://cbs.marketwatch.com/
http://www.cnbc.com/
http://www.cnnfn.com/
http://www.fool.com/
http://www.forbes.com/
http://interactive.wsj.com/ushome.html (need to pay a subscription fee)
http://messages.yahoo.com/bbs?action=topics&board=4687810&sid=4687810&type=r
http://www.morningstar.com/ (lots of mutual fund information)
http://www.nasdaq.com/
http://www.ragingbull.com/
http://www.siliconinvestor.com/
http://www.thestreet.com/
http://www.thomsoninvest.net/index.sht
http://www.thomsoninvest.net/iwatch/cgi-bin/iw_page?group=0&1=Go&temp=home (I-watch, to track block trades)

Hardware Enthusiasts (review) sites
http://www.aceshardware.com/
http://www.arstechnica.com/
http://www.anandtech.com/
http://www.cpureview.com/
http://www.firingsquad.com/
http://www.hardocp.com/
http://www.hardwarecentral.com/
http://www.overclockers.com/
http://www.realworldtech.com/
http://www.sharkyextreme.com/
http://www.sysopt.com/
http://www.tomshardware.com/
http://www.tweak3d.net/
http://www.amdzone.com/

Technology news
http://www.ebnews.com/
http://news.cnet.com/news/0-1002.html?tag=st.cn.1.dir.1002
http://www.jc-news.com/pc/ (LOTS of links)
http://www.semibiznews.com/
http://www.slashdot.org/
http://www.techweb.com/
http://www.theregister.co.uk/
http://www.wired.com/
http://www.theinquirer.net/
http://www.vanshardware.com
http://www.digitimes.com/
http://www.amdmb.com
http://www.siliconstrategies.com/
http://www.xbitlabs.com/
http://www.vr-zone.com/
http://www.infoworld.com/

More technical news/reports
http://www.eetimes.com/
http://www.jedec.org/
http://www.mdronline.com/

Prices on PC equipment
http://www.pricewatch.com/
http://shopper.cnet.com/

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Who wrote this FAQ?

April 2002 update by Sharps97 and corrections added by a number of other message board posters. Would like to thank graffixboy for posting the original FAQ. He thanked the following:

Thank you to reflector for the editing, otherwise, this faq would be barely readable. Thank you also to Spinality for doing editing, some major changes, adding the section for newbies, and covering our butts (especially mine ;) with that nice disclaimer. Way to go! I owe ya for all your work. A notable mention to JeffMLittle for doing what he could with what little time he has ;)

Contributions were also made by the following TMF posters who contributed questions, answers, suggestions, comments, corrections, and sometime whole sections in this faq. Without their help, this faq would probably be dead wrong on many parts and lacking in others. It's their faq as much as it is mine. Thanks guys. In alphabetical order:

APup, BeRealCNBC, cajhin, cameronj, cordob, drummer53, eander315, foo1bar, Hedgeslammer, Inductive, jcrash, JeffMLittle, kcmurphy, mschmit, nelson0, reflector, rmhj, Spinality, vikingfool, yonik. If I forgot anybody, I am very sorry and please email me and I'll put your name up.

Thanks jdot for inquiring about an AMD FAQ that got it started. And a big hug to all the people on the AMD board for making it actually fun sometimes to talk about stocks! Also a thank you to all the people whos posts I used in creating this FAQ. This thing would be worthless if it was only my words in here :)

=== end of FAQ ===
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