2488--3/1/2007--ADVANCED_MICRO_DEVICES

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Risks Related to Our Business Intel Corporation s dominance of the microprocessor market and its aggressive business practices may limit our ability to compete effectively. We may not realize all of the anticipated benefits of our acquisition of ATI. We cannot be certain that our substantial investments in research and development will lead to timely improvements in product designs or technology used to manufacture our products or that we will have sufficient resources to invest in the level of research and development that is required to remain competitive. The success of our business is dependent upon our ability to introduce products on a timely basis with required features and performance levels that provide value to our customers and support and coincide with significant industry transitions. Our ability to design and introduce new graphics products in a timely manner is dependent upon third party intellectual property. The semiconductor industry is highly cyclical and has experienced severe downturns that materially adversely affected, and may in the future materially adversely affect, our business. The demand for our products depends in part on continued growth in the industries and geographies into which they are sold. A market decline in any of these industries or geographies would have a material adverse effect on our results of operations. The markets in which our products are sold are highly competitive. We depend on third-party companies for the design, manufacture and supply of motherboards, BIOS software and other components. We must achieve further market acceptance of our 64-bit technology, AMD64, or we will be materially adversely affected. If we are ultimately unsuccessful in any of our antitrust lawsuits against Intel, our business may be materially adversely affected. The loss of a significant customer may have a material adverse effect on us. Our operating results are subject to quarterly and seasonal sales patterns. Manufacturing capacity constraints and manufacturing capacity utilization rates may have a material adverse affect on us. We rely on third party foundries and other contractors to manufacture certain products. If essential equipment or materials are not available to manufacture our products, we could be materially adversely affected. If we fail to improve the efficiency of our supply chain in order to respond to increases or changes in customer demand for our products, our business could be materially adversely affected. Industry overcapacity could cause us to under-utilize our microprocessor manufacturing facilities and have a material adverse effect on us. Unless we maintain manufacturing efficiency, our future profitability could be materially adversely affected. If we lose Microsoft Corporation s support for our products, our ability to sell our microprocessors could be materially adversely affected. If we cannot generate sufficient operating cash flow or obtain external financing, we may be unable to make all of our planned capital expenditures or fulfill our obligations. We have a substantial amount of indebtedness that could adversely affect our financial position. We may not be able to generate sufficient cash to service our debt obligations. Our debt instruments impose restrictions on us that may adversely affect our ability to operate our business. If we are unable to comply with the covenants in the subsidy grant documents that we receive from the State of Saxony, the Federal Republic of Germany and/or the European Union for Fab 30, Fab 36 or other research and development projects we may undertake in Germany, we may forfeit or have to repay our subsidies, which could materially adversely affect us. If our microprocessors are not compatible with some or all industry-standard software and hardware, we could be materially adversely affected. Costs related to defective products could have a material adverse effect on us. Our receipt of royalty revenues is dependent upon the success of third-party products. Our entry into new consumer markets is subject to a number of uncertainties. Our inability to continue to attract and retain qualified personnel may hinder our product development programs. We outsource to third parties certain supply-chain logistics functions, including physical distribution of our products, and co-source some information technology services. Uncertainties involving the ordering and shipment of, and payment for, our products could materially adversely affect us. Our reliance on third-party distributors subjects us to certain risks. Our operations in foreign countries are subject to political and economic risks, which could have a material adverse effect on us. Worldwide economic and political conditions may adversely affect demand for our products. Unfavorable currency exchange rate fluctuations could adversely affect us. Our inability to effectively control the sales of our products on the gray market could have a material adverse effect on us. 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 litigation, including intellectual property 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. We are subject to a variety of environmental laws that could result in liabilities. Our worldwide operations 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. Our business is subject to potential tax liabilities. Risks Related to Our Ownership of Spansion Inc. Common Stock The demand for Spansion s 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 demand for Flash memory products in these industries, would have a material adverse effect on Spansion s results of operations. Spansion has lost key intellectual property arrangements because it is no longer a beneficiary of our patent cross-license agreements and other licenses, which creates a greatly increased risk of patent or other intellectual property infringement claims against Spansion. A significant market shift to NAND architecture could materially adversely affect Spansion. Competitors may introduce new memory or other technologies that may make Spansion s Flash memory products uncompetitive or obsolete. If Spansion fails to successfully develop products based on its new MirrorBit NOR, or MirrorBit ORNAND or MirrorBit Quad architectures, or if there is a lack of market acceptance of products based on these products, Spansion s future operating results would be materially adversely affected. The loss of a significant customer or a reduction in demand for Spansion s Flash memory products from a significant customer in the mobile phone market could have a material adverse effect on Spansion has a substantial amount of indebtedness which could adversely affect its financial condition. If Spansion cannot generate sufficient operating cash flows and obtain external financing, it may be unable to make all of its planned capital expenditures. If Spansion is unable to timely and efficiently expand its manufacturing capacity to implement 300-millimeter wafer capacity at SP1, Spansion s business, results of operations or financial condition could be materially adversely affected. If Spansion s cost reduction efforts are not effective, Spansion s business could be materially adversely affected. Manufacturing capacity constraints may have a material adverse affect on Spansion. Spansion s increased reliance on third-party manufacturers entails risks that could materially adversely affect Spansion. Spansion s business has been characterized by average selling prices that decline over relatively short time periods, which can negatively affect Spansion s results of operations unless it is able to reduce its costs or introduce new products with higher average selling prices. Spansion is party to intellectual property litigation and may become party to other intellectual property claims or litigation that could cause it to incur substantial costs or pay substantial damages or prohibit it from selling its products. Intense competition in the Flash memory market could materially adversely affect Spansion. If essential equipment or adequate supplies of satisfactory materials are not available to manufacture Spansion s products, Spansion could be materially adversely affected. If the market value of our shares of Spansion common stock remains below our book value of such shares for an extended period of time, then our results of operations may be adversely affected.

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2488--3/1/2007--ADVANCED_MICRO_DEVICES_INC