1322705--3/15/2006--Spansion

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The demand for our products depends in large part on continued growth in the industries into which they are sold. A market decline in any of these industries, or a decline in the demand for NOR Flash memory products in these industries, would have a material adverse effect on our results of operations. We will lose rights to key intellectual property arrangements once we are no longer a beneficiary of AMD s patent cross-license agreements and other licenses, which creates a greatly increased risk of patent or other intellectual property infringement claims against us. A lack of market acceptance of MirrorBit technology would have a material adverse effect on us. A significant market shift to NAND architecture would materially adversely affect us. If we fail to successfully develop products based on our new MirrorBit ORNAND architecture, or if there is a lack of market acceptance of products based on our MirrorBit ORNAND architecture, our future operating results would be materially adversely affected. The loss of a significant customer for our Flash memory products in the mobile phone market could have a material adverse effect on us. We have a substantial amount of indebtedness which could adversely affect our financial position. We are currently party to and intend to enter into debt arrangements in the future, each of which may subject us to restrictive covenants which could limit our ability to operate our business. Our inability to design and implement new enterprise-wide information systems in a timely and cost-effective manner could materially adversely affect us. If we cannot generate sufficient operating cash flow and obtain external financing, we may be unable to make all of our planned capital expenditures. If our cost reduction efforts are not effective, our business could be materially adversely affected. If we fail to successfully develop, introduce and commercialize new products and technologies or to accelerate our product development cycle, we may be materially adversely affected. The Flash memory market is highly cyclical and has experienced severe downturns that have materially adversely affected, and may in the future materially adversely affect, our business. Manufacturing capacity constraints may adversely affect us. Industry overcapacity could require us to lower our prices and have a material adverse effect on us. Industry overcapacity could cause us to under-utilize our manufacturing facilities and have a material adverse effect on us. Our business has been characterized by average selling prices that decline over relatively short time periods, which can negatively affect our results of operations unless we are able to reduce our costs or introduce new products with higher average selling prices. Our historical financial results may not be indicative of our future performance as an independent company. Intense competition in the Flash memory market could materially adversely affect us. Competitors may introduce new memory technologies that may make our Flash memory products uncompetitive or obsolete. If we are unable to diversify our customer base, we could be materially adversely affected. We cannot be certain that our substantial investments in research and development will lead to timely improvements in technology or that we will have sufficient resources to invest in the level of research and development that is required to remain competitive. If we are unable to timely and efficiently implement 300-millimeter wafer capacity, our business, results of operations or financial condition could be materially adversely affected. Unless we maintain manufacturing efficiency, our future profitability could be materially adversely affected. 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 are party to intellectual property litigation and may become party to other intellectual property claims or litigation that could cause us to incur substantial costs or pay substantial damages or prohibit us from selling our products. We may not be successful in establishing a brand identity. If essential equipment or materials are not available to manufacture our products, we could be materially adversely affected. Our inability to continue to attract, retain and motivate qualified personnel could impact our business. Costs related to defective products could have a material adverse effect on us. Uncertainties involving the ordering of our products could materially adversely affect us. We may not achieve the sales that are suggested by our book-to-bill ratio. Unfavorable currency exchange rate fluctuations could adversely affect us. Worldwide economic and political conditions may adversely affect demand for our products. Our operations in foreign countries are subject to political and economic risks, which could have a material adverse effect on us. We are subject to a variety of environmental laws that could result in liabilities. Our worldwide operations and the operations of our suppliers could be subject to natural disasters and other business disruptions, which could harm our future revenue and financial condition and increase our costs and expenses. We may be delayed or prevented from taking actions that require the consent of AMD and Fujitsu, whose interests may differ from or conflict with our interests or those of our other stockholders, which could decrease the value of your shares. The interests of AMD and Fujitsu, and our directors nominated by them, may differ from or conflict with our interests or those of our other stockholders. Third parties may seek to hold us responsible for liabilities of AMD and Fujitsu that we did not assume in our agreements. We currently rely on AMD and Fujitsu for a number of services and our business may suffer if we do not timely and cost-effectively establish our own administrative and support systems. We rely on Fujitsu to be our sole distributor in Japan. We may experience increased costs resulting from decreased purchasing power since we are no longer a majority-owned subsidiary of AMD. AMD and Fujitsu may continue to use all of our intellectual property and the intellectual property they have transferred to us. Our share price may decline because of the ability of AMD and Fujitsu to sell shares of our common stock. Our share price may be volatile, and stockholders may be unable to sell their shares at or above the purchase price. If securities or industry analysts do not publish research reports about our business, or publish negative reports about our business, the price and trading volume of our securities could decline. Being a public company increases our expenses and administrative burden. We currently do not intend to pay dividends on our common stock and, consequently, our stockholders only opportunity to achieve a return on their investment is through appreciation in the price of our common stock. Our issuance of preferred stock could adversely affect holders of our common stock. Provisions in our corporate governance documents as well as Delaware law may delay or prevent an acquisition of us that stockholders may consider favorable, which could decrease the value of your shares.

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1322705--3/15/2006--Spansion_Inc.