AMD » Topics » Gross Margin

This excerpt taken from the AMD 10-K filed Feb 19, 2010.

Gross Margin

Gross margin as a percentage of net revenue was 42 percent in 2009, a 2 percentage point increase compared to 40 percent in 2008. Gross margin in 2009 included a $171 million, or 3 percent, benefit related to the sale of inventory that had been written-down in the fourth quarter of 2008. Gross margin in 2008 included a $191 million, or 2 percent, benefit from process technology license revenue recorded in our Computing Solutions segment and a $227 million, or 4 percent, negative impact from an incremental write-down of inventory. Without the effect of the above events in 2009 and 2008, which we believe gives a more comparable view, gross margin would have been 39 percent in 2009 compared to 42 percent in 2008. Gross margin in the first half of 2009 was adversely impacted by depressed average selling price and the under-utilization of GF’s manufacturing facilities as a result of reduced demand for our microprocessor products. However, the adverse impact of these factors on 2009 gross margin was partially mitigated by developments during the second half of 2009, including improvements in utilization of GF’s manufacturing facilities and an improvement in our unit costs primarily due to an increase in unit shipments of microprocessors manufactured using 45 nm process technology.

Gross margin as a percent of net revenue increased to 40 percent in 2008 compared to 37 percent in 2007. However, gross margin in 2008 was impacted by the following two events: the $191 million process technology license revenue recorded in our Computing Solutions segment favorably impacted gross margin in 2008 by 2 percentage points while the $227 million incremental write-down of inventory negatively impacted gross margin in 2008 by 4 percentage points. Without the effect of these items, gross margin would have been 42 percent in 2008 compared to 37 percent in 2007. This improvement in gross margin was primarily due to an improvement in fab utilization and reductions in manufacturing costs. Gross margin in 2008 was also favorably impacted by 1 percentage point due to the 76 percent increase in royalty revenue in connection with the sale of game consoles that incorporate our graphics technology. Although we experienced a richer product mix in 2008 compared to 2007, competitive pricing pressures mitigated any significant benefits to gross margin.

We record the grants and allowances that GF receives from the State of Saxony and the Federal Republic of Germany for their Dresden facilities as long-term liabilities on our consolidated financial statements. We amortize these amounts as they are earned as a reduction to operating expenses. The amortization of the production related grants and allowances is recorded as a credit to cost of sales. The credit to cost of sales totaled

 

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$46 million in 2009, $86 million in 2008 and $138 million in 2007. The fluctuations in the recognition of these credits have not significantly impacted our consolidated gross margins. With the deconsolidation of GF, our future consolidated financial statements will no longer directly reflect such credits to cost of sales. However, these credits will have a favorable impact on the amounts that we pay GF pursuant to the Wafer Supply Agreement.

Pursuant to Wafer Supply Agreement between AMD and GF, we agreed to compensate GF on a cost-plus basis, which results in increased per unit manufacturing costs for AMD compared to manufacturing wafers in-house. Although this cost-plus arrangement has not impacted our consolidated financial statements while we were consolidating the financial results of GF, as of the first quarter of 2010, we will no longer consolidate the financial results of GF, and this cost-plus arrangement will have a negative impact on our reported gross margins.

This excerpt taken from the AMD 10-Q filed May 6, 2009.

Gross Margin

Gross margin as a percentage of net revenue was 43 percent in the first quarter of 2009 compared to 42 percent in the first quarter of 2008. During the fourth quarter of 2008, we experienced a large incremental write-down of inventory of $227 million due to a weak economic outlook. Gross margin in the first quarter of 2009 included a $64 million, or 5 percentage points, benefit related to the sale of inventory that had been written-down in the fourth quarter of 2008. Without the effect of this benefit, gross margin in first quarter of 2009 would have declined 4 percentage points compared to the first quarter of 2008 due primarily to underutilization of front end wafer manufacturing assets and a decline in microprocessor average selling prices. In subsequent quarters we may be able to sell additional inventory that had been written-down in the fourth quarter of 2008. Therefore, subsequent quarters may continue to include a benefit to gross margin to the extent that such inventory that was written-down is sold.

Gross margin as a percentage of net revenue was 43 percent for the first quarter of 2009, a 20 percent increase compared to 23 percent in the fourth quarter of 2008. However, during the fourth quarter of 2008 we experienced a large incremental write-down of inventory due to a weak economic outlook. This $227 million incremental inventory write down negatively impacted fourth quarter 2008 gross margin by approximately 20 percentage points. As noted above, a portion of this inventory was sold in the first quarter of 2009, benefiting gross margin in the first quarter of 2009 by $64 million, or 5 percentage points. Without the impact of the incremental write-down of inventory in the fourth quarter 2008 and the benefit from the sale of a portion of that inventory in the first quarter of 2009, gross margin in the first quarter of 2009 would have declined 5 percentage points compared to the fourth quarter of 2008 due primarily to underutilization of front end manufacturing assets.

These excerpts taken from the AMD 10-K filed Feb 24, 2009.

Gross Margin

Gross margin as a percent of net revenue increased to 40 percent in 2008 compared to 37 percent in 2007. However, gross margin in 2008 was impacted by the following two events: the $191 million process technology license revenue recorded in our Computing Solutions segment favorably impacted gross margin in 2008 by 2 percentage points while the $227 million incremental write-down of inventory negatively impacted gross margin in 2008 by 4 percentage points. Without the effect of the incremental write-down of inventory and the process technology license revenue, gross margin would have been 42 percent in 2008 compared to 37 percent in 2007. This improvement in gross margin, was primarily due to an improvement in fab utilization and reductions in manufacturing costs. Gross margin in 2008 was also favorably impacted by 1 percentage point due to the 76% increase in royalty revenue received in 2008 compared to 2007 in connection with the sale of game consoles that incorporate our graphics technology. Although we experienced a richer product mix in 2008 compared to 2007, competitive pricing pressures mitigated any significant benefits to gross margin.

Gross margin as a percent of net revenue decreased to 37 percent in 2007 compared to 50 percent in 2006 primarily due to significantly lower average selling prices for our microprocessor products in 2007 compared to

 

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2006. Gross margin percentage in the first half of 2007 was also negatively impacted by higher manufacturing unit costs for our microprocessor products due to a shift in our product mix to higher-end microprocessors and increased depreciation expenses associated with the expansion of Fab 36. However, manufacturing efficiencies, improved inventory management, and a richer product mix in the second half of 2007 offset the unfavorable impact in the first half of 2007. On an annual basis, the inclusion of ATI’s lower margin operations in our consolidated operations adversely impacted our gross margins by approximately two percentage points.

We record grants and allowances that we receive from the State of Saxony and the Federal Republic of Germany for our Dresden facilities as long-term liabilities on our consolidated financial statements. We amortize these amounts as they are earned as a reduction to operating expenses. We record the amortization of the production related grants and allowances as a credit to cost of sales. The credit to cost of sales totaled $86 million in 2008, $138 million in 2007 and $116 million in 2006. The fluctuations in the recognition of these credits have not significantly impacted our gross margins.

Gross Margin

FACE="Times New Roman" SIZE="2">Gross margin as a percent of net revenue increased to 40 percent in 2008 compared to 37 percent in 2007. However, gross margin in 2008 was impacted by the following two events: the $191 million process technology
license revenue recorded in our Computing Solutions segment favorably impacted gross margin in 2008 by 2 percentage points while the $227 million incremental write-down of inventory negatively impacted gross margin in 2008 by 4 percentage points.
Without the effect of the incremental write-down of inventory and the process technology license revenue, gross margin would have been 42 percent in 2008 compared to 37 percent in 2007. This improvement in gross margin, was primarily due to an
improvement in fab utilization and reductions in manufacturing costs. Gross margin in 2008 was also favorably impacted by 1 percentage point due to the 76% increase in royalty revenue received in 2008 compared to 2007 in connection with the sale of
game consoles that incorporate our graphics technology. Although we experienced a richer product mix in 2008 compared to 2007, competitive pricing pressures mitigated any significant benefits to gross margin.

STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%">Gross margin as a percent of net revenue decreased to 37 percent in 2007 compared to 50 percent in 2006 primarily due to significantly lower average
selling prices for our microprocessor products in 2007 compared to

 


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2006. Gross margin percentage in the first half of 2007 was also negatively impacted by higher manufacturing unit costs for our microprocessor products due
to a shift in our product mix to higher-end microprocessors and increased depreciation expenses associated with the expansion of Fab 36. However, manufacturing efficiencies, improved inventory management, and a richer product mix in the second half
of 2007 offset the unfavorable impact in the first half of 2007. On an annual basis, the inclusion of ATI’s lower margin operations in our consolidated operations adversely impacted our gross margins by approximately two percentage points.

We record grants and allowances that we receive from the State of Saxony and the Federal Republic of Germany for our Dresden facilities as
long-term liabilities on our consolidated financial statements. We amortize these amounts as they are earned as a reduction to operating expenses. We record the amortization of the production related grants and allowances as a credit to cost of
sales. The credit to cost of sales totaled $86 million in 2008, $138 million in 2007 and $116 million in 2006. The fluctuations in the recognition of these credits have not significantly impacted our gross margins.

STYLE="margin-top:18px;margin-bottom:0px">Expenses

This excerpt taken from the AMD DEF 14A filed Jan 16, 2009.

Gross Margin

Gross margin decreased to 38 percent in 2007 compared to 50 percent in 2006 primarily due to significantly lower average selling prices for our microprocessor products in 2007 compared to 2006. Gross margin percentage in the first half of 2007 was also negatively impacted by higher manufacturing unit costs for our microprocessor products due to a shift in our product mix to higher-end microprocessors and increased depreciation expenses associated with the expansion of Fab 36. However, manufacturing efficiencies, improved inventory management, and a richer product mix in the second half of 2007 offset the unfavorable impact in the


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first half of 2007. On an annual basis, the inclusion of ATI’s lower margin operations in our consolidated operations adversely impacted our gross margins by approximately two percentage points.

Gross margin increased to 50 percent in 2006 compared to 41 percent in 2005 because we did not consolidate Spansion’s results of operations, which historically had lower margins, with ours in 2006. Gross margin decreased to 50 percent in 2006 compared to gross margin, excluding the Memory Products segment, of 56 percent in 2005. Higher gross margins in the first half of 2006 were more than offset by lower gross margins in the second half of 2006. This decrease in gross margin was primarily due to increased manufacturing unit costs and flat average selling prices due to competitive market conditions in the second half of 2006. The increase in manufacturing unit costs was primarily due to a shift in our product mix to higher-end microprocessor products. In addition, consolidated gross margin was adversely impacted by approximately two percentage points due to the consolidation of ATI’s operations into ours from October 25, 2006 through December 31, 2006. Gross margin was also adversely impacted by approximately one percentage point due to the costs of fair value adjustments related to the inventory we acquired through the ATI acquisition.

We record grants and allowances that we receive from the State of Saxony and the Federal Republic of Germany for Fab 30 or Fab 36 as long-term liabilities on our consolidated financial statements. We amortize these amounts as they are earned as a reduction to operating expenses. We record the amortization of the production related grants and allowances as a credit to cost of sales. The credit to cost of sales totaled $138 million in 2007, $116 million in 2006 and $72 million in 2005. The fluctuations in the recognition of these credits have not significantly impacted our gross margins.

This excerpt taken from the AMD 8-K filed Jan 9, 2009.

Gross Margin

Gross margin decreased to 38 percent in 2007 compared to 50 percent in 2006 primarily due to significantly lower average selling prices for our microprocessor products in 2007 compared to 2006. Gross margin percentage in the first half of 2007 was also negatively impacted by higher manufacturing unit costs for our microprocessor products due to a shift in our product mix to higher-end microprocessors and increased depreciation expenses associated with the expansion of Fab 36. However, manufacturing efficiencies, improved inventory management, and a richer product mix in the second half of 2007 offset the unfavorable impact in the first half of 2007. On an annual basis, the inclusion of ATI’s lower margin operations in our consolidated operations adversely impacted our gross margins by approximately two percentage points.

Gross margin increased to 50 percent in 2006 compared to 41 percent in 2005 because we did not consolidate Spansion’s results of operations, which historically had lower margins, with ours in 2006. Gross margin decreased to 50 percent in 2006 compared to gross margin, excluding the Memory Products segment, of 56 percent in 2005. Higher gross margins in the first half of 2006 were more than offset by lower gross margins in the second half of 2006. This decrease in gross margin was primarily due to increased manufacturing unit costs and flat average selling prices due to competitive market conditions in the second half of 2006. The increase in manufacturing unit costs was primarily due to a shift in our product mix to higher-end microprocessor products. In addition, consolidated gross margin was adversely impacted by approximately two percentage points due to the consolidation of ATI’s operations into ours from October 25, 2006 through December 31, 2006. Gross margin was also adversely impacted by approximately one percentage point due to the costs of fair value adjustments related to the inventory we acquired through the ATI acquisition.

We record grants and allowances that we receive from the State of Saxony and the Federal Republic of Germany for Fab 30 or Fab 36 as long-term liabilities on our consolidated financial statements. We amortize these amounts as they are earned as a reduction to operating expenses. We record the amortization of the production related grants and allowances as a credit to cost of sales. The credit to cost of sales totaled $138 million in 2007, $116 million in 2006 and $72 million in 2005. The fluctuations in the recognition of these credits have not significantly impacted our gross margins.

 

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This excerpt taken from the AMD 10-Q filed Nov 6, 2008.

Gross Margin

Gross margin as a percentage of net revenue increased to 51 percent in the third quarter of 2008 compared to 41 percent in the third quarter of 2007. The increase in gross margin included the effect of $191 million process technology license revenue recorded in our Computing Solutions segment, which favorably impacted gross margin by 6 percentage points. The remainder of the increase was primarily due an improvement in our product mix, partially offset by a decrease in average selling prices.

Gross margin as a percentage of net revenue decreased to 51 percent in the third quarter of 2008 compared to 52 percent in the second quarter of 2008. In the second quarter of 2008, gross margin included the effect of the $193 million gain on the sale of 200 millimeter equipment, which favorably impacted gross margin by 14 percentage points. In the third quarter of 2008 gross margin included the effect of $191 million in technology license revenue, which favorably impacted gross margin by 6 percentage points. Excluding the favorable impact of the gain on the sale of 200 millimeter equipment and the process technology license revenue, which we believe gives a more comparable view of our gross margin, gross margin in the third quarter of 2008 would have increased approximately 8 percentage points compared to the second quarter of 2008 due to an increase in unit shipments and an improvement in our product mix.

Gross margin as a percentage of net revenue increased to 48 percent in the first nine months of 2008 compared to 35 percent in the first nine months of 2007. The increase in gross margin included the effect of the $193 million gain on the sale of 200 millimeter equipment and the $191 million process technology license revenue referenced above, which favorably impacted gross margin by 7 percentage points. The remainder of the gross margin increase was due to an increase in unit shipments, an increase in average selling prices and an overall improvement in our product mix.

We record grants and allowances that we receive from the State of Saxony and the Federal Republic of Germany for Fab 30 or Fab 36 as long-term liabilities on our financial statements. We amortize these amounts as they are earned as a reduction to operating expenses. We record the amortization of the production related grants and allowances as a credit to cost of sales. The credit to cost of sales totaled $20 million in the third quarter of 2008, $18 million in the second quarter of 2008, and $34 million in the third quarter of 2007. The fluctuations in the recognition of these credits have not significantly impacted our gross margins.

This excerpt taken from the AMD 10-Q filed Aug 6, 2008.

Gross Margin

Gross margin as a percentage of net revenue increased to 52 percent in the second quarter of 2008 compared to 34 percent in the second quarter of 2007. The increase in gross margin included the effect of a $193 million gain on the sale of 200 millimeter equipment recorded by our Computing Solutions segment, which favorably impacted gross margin by approximately 14 percentage points. The remainder of the increase was primarily due to a shift in microprocessor product mix from our single core products to our multi-core products, which generally have higher gross margins, partially offset by a decrease in average selling prices.

Gross margin as a percentage of net revenue increased to 52 percent in the second quarter of 2008 compared to 41 percent in the first quarter of 2008. The increase in gross margin included the effect of the $193 million gain on the sale of 200 millimeter equipment referenced above. Without the effect of the gain, gross margin decreased approximately 4 percentage points. The decrease was primarily from lower microprocessor average selling prices.

Gross margin as a percentage of net revenue increased to 46 percent in the first six months of 2008 compared to 31 percent in the first six months of 2007. The increase in gross margin included the effect of the $193 million gain on the sale of 200 millimeter equipment referenced above. The remainder of the increase was primarily due to a shift in product mix from single core microprocessors to our multi-core products, which generally have higher gross margins.

We record grants and allowances that we receive from the State of Saxony and the Federal Republic of Germany for Fab 30 or Fab 36 as long-term liabilities on our financial statements. We amortize these amounts as they are earned as a reduction to operating expenses. We record the amortization of the production related grants and allowances as a credit to cost of sales. The credit to cost of sales totaled $18 million in the second quarter of 2008, $18 million in the first quarter of 2008, and $34 million in the second quarter of 2007. The fluctuations in the recognition of these credits have not significantly impacted our gross margins.

This excerpt taken from the AMD 10-Q filed May 7, 2008.

Gross Margin

Gross margin as a percentage of net revenue increased to 42 percent in the first quarter of 2008 compared to 28 percent in the first quarter of 2007. The improvement in gross margin was primarily due to lower cost of sales per unit due to higher unit shipments of products included in our Computing Solutions and Graphics segments and the shift in product mix from single core processors to dual core processors. Moreover, gross margin was negatively impacted by approximately two percentage points in the first quarter of 2007 due to fair value adjustments related to the inventory we acquired through the ATI acquisition, which did not recur in the first quarter of 2008.

Gross margin as a percentage of net revenue decreased to 42 percent in the first quarter of 2008 compared to 44 percent in the fourth quarter of 2007. The decrease in gross margin was primarily due to higher cost of sales per unit due to lower microprocessor unit shipments.

We record grants and allowances that we receive from the State of Saxony and the Federal Republic of Germany for Fab 30 or Fab 36 as long-term liabilities on our financial statements. We amortize these amounts as they are earned as a reduction to operating expenses. We record the amortization of the production related grants and allowances as a credit to cost of sales. The credit to cost of sales totaled $18 million in the first quarter of 2008, $37 million in the fourth quarter of 2007, and $33 million in the first quarter of 2007. The fluctuations in the recognition of these credits have not significantly impacted our gross margins. The decrease in the credit to cost of sales in the first quarter of 2008 compared to the fourth quarter of 2007 was due to the fact that we have fully amortized the grants and allowances related to Fab 30.

 

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These excerpts taken from the AMD 10-K filed Feb 26, 2008.

Gross Margin

Gross margin decreased to 38 percent in 2007 compared to 49 percent in 2006 primarily due to significantly lower average selling prices for our microprocessor products in 2007 compared to 2006. Gross margin percentage in the first half of 2007 was also negatively impacted by higher manufacturing unit costs for our microprocessor products due to a shift in our product mix to higher-end microprocessors and increased depreciation expenses associated with the expansion of Fab 36. However, manufacturing efficiencies, improved inventory management, and a richer product mix in the second half of 2007 offset the unfavorable impact in the first half of 2007. On an annual basis, the inclusion of ATI’s lower margin operations in our consolidated operations adversely impacted our gross margins by approximately two percentage points.

Gross margin increased to 49 percent in 2006 compared to 41 percent in 2005 because we did not consolidate Spansion’s results of operations, which historically had lower margins, with ours in 2006. Gross margin decreased to 49 percent in 2006 compared to gross margin, excluding the Memory Products segment, of 56 percent in 2005. Higher gross margins in the first half of 2006 were more than offset by lower gross margins in the second half of 2006. This decrease in gross margin was primarily due to increased manufacturing unit costs and flat average selling prices due to competitive market conditions in the second half of 2006. The increase in manufacturing unit costs was primarily due to a shift in our product mix to higher-end microprocessor products. In addition, consolidated gross margin was adversely impacted by approximately two percentage points due to the consolidation of ATI’s operations into ours from October 25, 2006 through December 31, 2006. Gross margin was also adversely impacted by approximately one percentage point due to the costs of fair value adjustments related to the inventory we acquired through the ATI acquisition.

We record grants and allowances that we receive from the State of Saxony and the Federal Republic of Germany for Fab 30 or Fab 36 as long-term liabilities on our consolidated financial statements. We amortize these amounts as they are earned as a reduction to operating expenses. We record the amortization of the production related grants and allowances as a credit to cost of sales. The credit to cost of sales totaled $138 million in 2007, $116 million in 2006, and $72 million in 2005. The fluctuations in the recognition of these credits have not significantly impacted our gross margins.

 

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Gross Margin

FACE="Times New Roman" SIZE="2">Gross margin decreased to 38 percent in 2007 compared to 49 percent in 2006 primarily due to significantly lower average selling prices for our microprocessor products in 2007 compared to 2006. Gross margin percentage
in the first half of 2007 was also negatively impacted by higher manufacturing unit costs for our microprocessor products due to a shift in our product mix to higher-end microprocessors and increased depreciation expenses associated with the
expansion of Fab 36. However, manufacturing efficiencies, improved inventory management, and a richer product mix in the second half of 2007 offset the unfavorable impact in the first half of 2007. On an annual basis, the inclusion of ATI’s
lower margin operations in our consolidated operations adversely impacted our gross margins by approximately two percentage points.

Gross
margin increased to 49 percent in 2006 compared to 41 percent in 2005 because we did not consolidate Spansion’s results of operations, which historically had lower margins, with ours in 2006. Gross margin decreased to 49 percent in 2006
compared to gross margin, excluding the Memory Products segment, of 56 percent in 2005. Higher gross margins in the first half of 2006 were more than offset by lower gross margins in the second half of 2006. This decrease in gross margin was
primarily due to increased manufacturing unit costs and flat average selling prices due to competitive market conditions in the second half of 2006. The increase in manufacturing unit costs was primarily due to a shift in our product mix to
higher-end microprocessor products. In addition, consolidated gross margin was adversely impacted by approximately two percentage points due to the consolidation of ATI’s operations into ours from October 25, 2006 through December 31,
2006. Gross margin was also adversely impacted by approximately one percentage point due to the costs of fair value adjustments related to the inventory we acquired through the ATI acquisition.

STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%">We record grants and allowances that we receive from the State of Saxony and the Federal Republic of Germany for Fab 30 or Fab 36 as long-term
liabilities on our consolidated financial statements. We amortize these amounts as they are earned as a reduction to operating expenses. We record the amortization of the production related grants and allowances as a credit to cost of sales. The
credit to cost of sales totaled $138 million in 2007, $116 million in 2006, and $72 million in 2005. The fluctuations in the recognition of these credits have not significantly impacted our gross margins.

STYLE="margin-top:0px;margin-bottom:0px"> 


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This excerpt taken from the AMD 10-Q filed Nov 7, 2007.

Gross Margin

Gross margin, as a percentage of net revenue, decreased to 41 percent in the third quarter of 2007 compared to 51 percent in the third quarter of 2006 primarily due to lower average selling prices for our microprocessor products. In addition, consolidated gross margin was unfavorably impacted due to the consolidation of ATI’s lower margin operations into ours in the third quarter of 2007.

Gross margin, as a percentage of net revenue, increased to 41 percent in the third quarter of 2007 compared to 33 percent in the second quarter of 2007. Higher unit shipments and improved microprocessor manufacturing efficiencies accounted for approximately 3 percentage points of improvement to the gross margin. A richer product mix of graphics processors and microprocessors contributed to higher average selling prices and approximately 2 percentage points of improvement to gross margin. Improved inventory management accounted for approximately 3 percentage points of improvement to gross margin, of which approximately 2 percentage points resulted from our recording an inventory write-down charge of $30 million for older generation microprocessors in the second quarter of 2007.

Gross margin decreased to 35 percent in the first nine months of 2007 compared to 56 percent in the first nine months of 2006 due to lower average selling prices and higher manufacturing costs in the first nine months of 2007 compared to the first nine months of 2006. The increase in manufacturing costs was due to a shift in product mix to higher-end microprocessors and increased expenses associated with the ramp of Fab 36. Moreover, gross margin in the first nine months of 2007 was unfavorably impacted due to the consolidation of ATI’s lower margin operations with ours. Gross margin was also negatively impacted during the first nine months of 2007 by an inventory write-down charge of approximately $30 million, or one percentage point of year-to-date revenue, associated with older generation microprocessor inventory and the cost of fair value adjustments of $29 million, or one percentage point, related to the inventory we acquired in the ATI acquisition and sold during the first quarter of 2007.

 

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We record grants and allowances that we receive from the State of Saxony and the Federal Republic of Germany for Fab 30 or Fab 36 as long-term liabilities on our financial statements. We amortize these amounts as they are earned as a reduction to operating expenses. We record the amortization of the production related grants and allowances as a credit to cost of sales. The credit to cost of sales totaled $34 million in the third quarter of 2007, $34 million in the second quarter of 2007 and $30 million in the third quarter of 2006. The credit to cost of sales totaled $101 million in the first nine months of 2007 and $84 million in the first nine months of 2006. The fluctuations in the recognition of these credits have not significantly impacted our gross margins.

This excerpt taken from the AMD 10-Q filed Aug 7, 2007.

Gross Margin

Gross margin, as a percentage of net revenue, decreased to 33 percent in the second quarter of 2007 compared to 57 percent in the second quarter of 2006 primarily due to significantly lower average selling prices and higher manufacturing costs. Average selling prices decreased for the reasons cited above. The increase in manufacturing costs was due to a shift in product mix to higher-end microprocessors and increased depreciation expenses associated with the ramp

 

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of Fab 36. In the second quarter of 2007, gross margin was also negatively impacted by an inventory write-down of approximately $30 million, or two percentage points, associated with older generation microprocessor inventory. In addition, consolidated gross margin was adversely impacted due to the consolidation of ATI’s lower margin operations into ours in the second quarter of 2007.

Gross margin, as a percentage of net revenue, increased to 33 percent in the second quarter of 2007 compared to 28 percent in the first quarter of 2007 due to higher microprocessor unit shipments. The improvement in gross margin in the second quarter was partially offset by an inventory write-down of approximately $30 million, or two percentage points, associated with older generation microprocessor inventory. In addition, the first quarter of 2007 gross margin was adversely impacted by approximately two percentage points due to the cost of fair value adjustments of $29 million related to the inventory we acquired in the ATI acquisition and which was sold during the first quarter of 2007.

Gross margin decreased to 31 percent in the first six months of 2007 compared to 58 percent in the first six months of 2006 due to significantly lower average selling prices and higher manufacturing costs in the first six months of 2007 compared to the first six months of 2006. Average selling prices decreased for the reasons cited above. The increase in manufacturing costs was due to a shift in product mix to higher-end microprocessors and increased depreciation expenses associated with the ramp of Fab 36. Gross margin in the first six months of 2007 was adversely impacted due to the consolidation of ATI’s lower margin operations with ours. Gross margin was also negatively impacted during the first six months of 2007 by the inventory write-down of approximately $30 million, or one percentage point, associated with older generation microprocessor inventory and the cost of fair value adjustments of $29 million, or one percentage point, related to the inventory we acquired in the ATI acquisition and which we sold during the first quarter of 2007.

To the extent that average selling prices continue to decrease without a corresponding decrease in manufacturing costs, our gross margins will be adversely impacted. Other factors that may affect gross margin include product mix, capacity utilization, inventory valuation or excess or obsolete inventory, manufacturing yields, the timing and execution of transitions to advanced manufacturing technologies, and depreciation expense.

We record grants and allowances that we receive from the State of Saxony and the Federal Republic of Germany for Fab 30 or Fab 36 as long-term liabilities on our financial statements. We amortize these amounts as they are earned as a reduction to operating expenses. We record the amortization of the production related grants and allowances as a credit to cost of sales. The credit to cost of sales totaled $34 million in the second quarter of 2007, $33 million in the first quarter of 2007 and $28 million in the second quarter of 2006. The credit to cost of sales totaled $67 million in the first six months of 2007 and $54 million in the first six months of 2006. The fluctuations in the recognition of these credits have not significantly impacted our gross margins.

This excerpt taken from the AMD 10-Q filed May 9, 2007.

Gross Margin

Gross margin as a percentage of net revenue decreased to 28 percent in the first quarter of 2007 compared to 58 percent in the first quarter of 2006 primarily due to significantly lower average selling prices and higher manufacturing costs for our microprocessors in the first quarter of 2007. The increase in manufacturing costs was primarily due to a shift in our product mix to higher-end microprocessors and increased depreciation expenses associated with the ramp up of Fab 36. In addition, consolidated gross margin was adversely impacted by approximately eight percentage points due to the consolidation of ATI’s operations into ours in the first quarter of 2007. Gross margin was also adversely impacted by approximately two and one half percentage points due to the cost of fair value adjustments related to the inventory we acquired through the ATI acquisition.

Gross margin as a percentage of net revenue decreased to 28 percent in the first quarter of 2007 compared to 36 percent in the fourth quarter of 2006 primarily due to lower average selling prices for our microprocessors in the first quarter of 2007 as compared to the fourth quarter of 2006. Gross margin was also adversely impacted by approximately two and one half percentage points due to the cost of fair value adjustments related to the inventory we acquired in the ATI acquisition and which was sold during the first quarter of 2007. To the extent that average selling prices decrease without a corresponding decrease in manufacturing costs, our gross margins will be adversely impacted. Other factors that may affect gross margin include product mix, capacity utilization, inventory valuation or excess obsolete inventory, manufacturing yields, the timing and execution of transitions to advanced manufacturing technologies, and depreciation expense. We anticipate increased depreciation expenses in the second quarter of 2007 as compared to the first quarter of 2007.

We record grants and allowances that we receive from the State of Saxony and the Federal Republic of Germany for Fab 30 or Fab 36 as long-term liabilities on our financial statements. We amortize these amounts as they are earned as a reduction to operating expenses. We record the amortization of the production related grants and allowances as a credit to cost of sales. The credit to cost of sales totaled $33 million in the first quarter of 2007, $32 million in the fourth quarter of 2006 and $26 million in the first quarter of 2006. The fluctuations in the recognition of these credits have not significantly impacted our gross margins.

 

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This excerpt taken from the AMD 10-K filed Mar 1, 2007.

Gross Margin

 

Gross margin increased to 49 percent in 2006 compared to 41 percent in 2005 because we did not consolidate Spansion’s results of operations with ours in 2006. Gross margin decreased to 49 percent in 2006 compared to gross margin, excluding the Memory Products segment, of 56 percent in 2005. Higher gross margin in the first half of 2006 was more than offset by lower gross margin in the second half of 2006. The decrease in gross margin in 2006 compared to 2005 was primarily due to increased manufacturing costs and flat average selling prices. The increase in manufacturing costs was primarily due to a shift in our product mix to higher-end microprocessor products. In addition, consolidated gross margin was adversely impacted by approximately two percent due to the consolidation of ATI’s operations into ours from October 25, 2006 through December 31, 2006. Historically, the ATI business had lower gross margins as compared to AMD. Gross margin was also adversely impacted by approximately one percent due to the costs of fair value adjustments related to the inventory we acquired through the ATI acquisition. To the extent that average selling prices decrease without a corresponding decrease in manufacturing costs, our gross margins will be adversely impacted.

 

Gross margin increased to 41 percent in 2005 compared to 39 percent in 2004. The improvement in gross margin was primarily due to increased sales of our microprocessor products, which comprised a greater percentage of total net revenue in 2005 as compared to 2004. Computation Products net revenue carried a higher gross margin than Memory Products net revenue. In addition, the improvement in gross margin was due to a 1.5 percent increase in gross margin for Computation Products. Computation Products gross margin improved as a result of a nine percent increase in average selling prices discussed above, partially offset by increased manufacturing costs caused by the shift in our product mix to higher-end microprocessor products. Gross margin also improved because we were better able to absorb our fixed manufacturing costs due in part to improving yields at Fab 30. The improvement in gross margin was partially offset by a 12 percent decrease in gross margin for Memory Products due primarily to a decrease of 28 percent in average selling prices in 2005 compared to 2004, partially offset by an increase of 14 percent in unit shipments in 2005 compared to 2004.

 

We record grants and allowances that we receive from the State of Saxony and the Federal Republic of Germany for Fab 30 or Fab 36 as long-term liabilities on our consolidated financial statements. We amortize these amounts as they are earned as a reduction to operating expenses. We record the amortization of the

 

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production related grants and allowances as a credit to cost of sales. The credit to cost of sales totaled $116 million in 2006, $72 million in 2005, and $67 million in 2004. The fluctuations in the recognition of these credits have not significantly impacted our gross margins.

 

This excerpt taken from the AMD 10-Q filed Nov 9, 2006.

Gross Margin

Gross margin of 51 percent in the third quarter of 2006 increased from 41 percent in the third quarter of 2005 partially due to the fact that during the third quarter of 2006, we did not consolidate Spansion’s results of operations. Gross margin of 51 percent in the third quarter of 2006 decreased as compared to gross margin, excluding the Memory Products segment, of 55 percent in the third quarter of 2005. This decrease was primarily due to increased manufacturing costs caused by a shift in our product mix to higher-end microprocessor products, and the fact that during the third quarter of 2006, we recognized depreciation expense on Fab 36-related production assets to cost of sales. The increase in manufacturing costs was partially offset by the credit to cost of sales from amortization of grants and allowances that we received from the State of Saxony and the Federal Republic of Germany described below.

Gross margin of 51 percent in the third quarter of 2006 decreased as compared to 57 percent in the second quarter of 2006 primarily due to lower average selling prices for our desktop processors, which contributed to lower overall average selling prices. In addition, the demand for our mobile processors was stronger than anticipated in the third quarter, which resulted in increased costs as we adjusted the supply chain to meet this demand in addition to supporting a transition to new products. Gross margin was also negatively impacted by the mix of products shipped in the third quarter of 2006.

Gross margin increased to 56 percent in the first nine months of 2006 compared to 38 percent in the first nine months of 2005 due to the fact that during the first nine months of 2006, we did not consolidate Spansion’s results of operations with ours. Gross margin of 56 percent for the first nine months of 2006 was flat as compared to gross margin, excluding the Memory Products segment, for the first nine months of 2005. Gross margin for the first nine months of 2006 was primarily impacted by an increase of eight percent in average selling prices of our microprocessor products, offset by increased manufacturing costs caused by a shift in our product mix to higher-end microprocessor products and the fact that in the first quarter of 2006, we began recognizing depreciation expense on Fab 36-related production assets to cost of sales. The increase in manufacturing costs was partially offset by the credit to cost of sales from amortization of grants and allowances that we received from the State of Saxony and the Federal Republic of Germany described below.

We record grants and allowances that we receive from the State of Saxony and the Federal Republic of Germany for Fab 30 or Fab 36 as long-term liabilities on our financial statements. We amortize these amounts as they are earned as a reduction to operating expenses. We record the amortization of the production related grants and allowances as a credit to cost of sales. The credit to cost of sales totaled $30 million in the third quarter of 2006, $28 million in the second quarter of 2006 and $18 million in the third quarter of 2005. The credit to cost of sales totaled $84 million in the first nine months of 2006 and $54 million in the first nine months of 2005. The fluctuations on the recognition of these credits have not significantly impacted our gross margins.

 

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This excerpt taken from the AMD 10-Q filed Aug 11, 2006.

Gross Margin

Gross margin of 57 percent in the second quarter of 2006 increased from 39 percent in the second quarter of 2005 due to the fact that during the second quarter of 2006, we did not consolidate Spansion’s results of operations with ours. Gross margin of 57 percent in the second quarter of 2006 decreased as compared to gross margin, excluding the Memory Products segment, of 58 percent in the second quarter of 2005. This decrease was primarily due to increased manufacturing costs caused by a shift in our product mix to higher-end microprocessor products. Manufacturing costs also increased because in the first quarter of 2006, we produced revenue-generating products in Fab 36, and we began recognizing depreciation expense on Fab 36-related production assets to cost of sales. The increase in manufacturing costs was partially offset by a six percent increase in average selling prices of our microprocessors and the credit to cost of sales from amortization of grants and allowances that we receive from the State of Saxony and the Federal Republic of Germany described below.

Gross margin of 57 percent in the second quarter of 2006 decreased as compared to 58 percent in the first quarter of 2006. This decrease was primarily due to lower average selling prices for desktop processors due to the challenging market conditions referenced above.

Gross margin increased to 58 percent in the first six months of 2006 compared to 37 percent in the first six months of 2005 due to the fact that during the first six months of 2006, we did not consolidate Spansion’s results of operations with ours. Also, gross margin of 58 percent for the first six months of 2006 increased as compared to gross margin, excluding the Memory Products segment, of 55 percent for the first six months of 2005. The improvement in gross margin was primarily attributable to an increase of 13 percent in average selling prices of our microprocessor products, partially offset by increased manufacturing costs caused by a shift in our product mix to higher-end microprocessor products and the fact that we began recognizing depreciation expense on Fab 36-related production assets to cost of sales.

 

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We record grants and allowances that we receive from the State of Saxony and the Federal Republic of Germany for Fab 30 or Fab 36 as long-term liabilities on our financial statements. We amortize these amounts as they are earned as a reduction to operating expenses. We record the amortization of the production related grants and allowances as a credit to cost of sales. The credit to cost of sales totaled $28 million in the second quarter of 2006, $26 million in the first quarter of 2006 and $18 million in the second quarter of 2005. The credit to cost of sales totaled $54 million in the first six months of 2006 and $36 million in the first six months of 2005. The fluctuations in the recognition of these credits have not significantly impacted our gross margins.

This excerpt taken from the AMD 10-Q filed May 5, 2006.

Gross Margin

Gross margin as a percentage of net sales increased to 58 percent in the first quarter of 2006 compared to 34 percent in the first quarter of 2005 and 46 percent in the fourth quarter of 2005 primarily due to the fact that during the first quarter of 2006, we did not consolidate Spansion’s results of operations with ours.

 

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Gross margin as a percentage of net sales, excluding the Memory Products segment, was 53 percent in the first quarter of 2005 and 57 percent in the fourth quarter of 2005. The improvement in gross margin percentage, excluding the Memory Products segment, from the first quarter of 2005 was primarily due to an increase of 21 percent in average selling prices for our microprocessor products, partially offset by increased manufacturing costs caused by the shift in our product mix to higher-end microprocessor products. The improvement in gross margin, excluding the Memory Products segment, from the fourth quarter of 2005 was primarily due to an increase of seven percent in average selling prices for our microprocessor products due to an improvement in the mix of microprocessors sold and manufacturing efficiencies at Fab 30.

We record grants and allowances that we receive from the State of Saxony and the Federal Republic of Germany for Fab 30 or Fab 36 as long-term liabilities on our financial statements. We amortize these amounts as they are earned as a reduction to operating expenses. We record the amortization of the production related grants and allowances as a credit to cost of sales. The credit to cost of sales totaled $26 million in the first quarter of 2006, $17 million in the fourth quarter of 2005 and $18 million in the first quarter of 2005. The fluctuations in the recognition of these credits have not significantly impacted our gross margins.

In 2005 and 2004 we capitalized construction, equipment and facilitization costs related to Fab 36. In the first quarter of 2006, we produced revenue-generating products in Fab 36, and we began recognizing depreciation expense on Fab 36-related production assets to cost of sales. At the beginning of the second quarter of 2006, we began shipping and recognizing revenue on products produced in Fab 36.

This excerpt taken from the AMD 10-K filed Feb 27, 2006.

Gross Margin

 

Gross margin percentage increased to 41 percent in 2005 compared to 39 percent in 2004. The improvement in gross margin percentage was primarily due to microprocessor net sales, which comprised a greater percentage of total net sales in 2005 as compared to 2004. Microprocessor net sales carried a higher gross margin than Flash

 

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memory net sales. In addition, the improvement in gross margin was due to a 1.5 percent increase in gross margin for Computation Products. Computation Products margin improved as a result of a nine percent increase in average selling prices discussed above, partially offset by increased manufacturing costs caused by the shift in our product mix to higher-end microprocessor products. Gross margin also improved because we were better able to absorb our fixed manufacturing costs due in part to improving yields at Fab 30. The improvement in gross margin was partially offset by a 12 percent decrease in gross margin for Memory Products due primarily to a decrease of 28 percent in average selling prices in 2005 compared to 2004, partially offset by an increase of 14 percent in unit shipments in 2005 compared to 2004.

 

Gross margin percentage increased to 39 percent in 2004 compared to 34 percent in 2003. The increase in gross margin was primarily due to an increase in net sales of 42 percent and lower unit manufacturing costs resulting from our transition to smaller, more cost efficient manufacturing process technologies for both microprocessors and Flash memory products. Further quantification of the improvement in gross margin percentage is not practical due to the consolidation of Spansion’s operating results as of June 30, 2003.

 

We record grants and allowances that we receive from the State of Saxony and the Federal Republic of Germany for Fab 30 or Fab 36, and we recorded the interest subsidies we received for Fab 30, as long-term liabilities on our financial statements. We amortize these amounts as they are earned as a reduction to operating expenses. We record the amortization of the production related grants and allowances as a credit to cost of sales. The credit to cost of sales totaled $72 million in 2005, $67 million in 2004 and $46 million in 2003. The fluctuations in the recognition of these credits have not significantly impacted our gross margins.

 

In 2005 and 2004 we capitalized construction and facilitization costs related to Fab 36. Once Fab 36 begins producing revenue-generating products, which we anticipate will be in the first quarter of 2006, we will begin depreciating these costs to cost of sales.

 

This excerpt taken from the AMD 10-Q filed Nov 3, 2005.

Gross Margin

 

Gross margin of 41 percent in the third quarter of 2005 improved from 39 percent in the second quarter of 2005. The improvement in gross margin was primarily due to an improvement in the gross margin for Memory Products. Gross margin for Memory Products increased in the third quarter of 2005 as compared to the second quarter of 2005 due to a 15 percent increase in unit shipments, partially offset by a three percent decrease in average selling prices. Gross margin for Memory Products also was favorably impacted by three factors: a greater percentage of MirrorBit products shipped; a greater percentage of higher density products shipped; and increased utilization of Spansion’s manufacturing facilities.

 

Gross margin of 41 percent in the third quarter of 2005 improved slightly from 40 percent in the third quarter of 2004. The improvement in gross margin from the third quarter of 2004 was primarily due to an improvement in the gross margin for Computation Products, partially offset by a decline in the gross margin for Memory Products. Gross margin for Computation Products increased due to an increase in unit shipments of 41 percent. Gross margin for Memory Products declined due primarily to a decrease of average selling prices of 32 percent partially offset by an increase of 40 percent in unit shipments.

 

Gross margin of 38 percent in the first nine months of 2005 declined slightly compared to 39 percent in the first nine months of 2004. The decline in the gross margin for Memory Products in the first nine months of 2005 was partially offset by an improvement in the gross margin for Computation Products. The decline in gross margin for Memory Products in the first nine months of 2005 was primarily due to a decrease in net sales of 23 percent relative to a decrease in cost of sales of only 7 percent. Cost of sales declined at a lower rate than net sales because many of our costs are fixed and cannot be reduced in proportion to the reduced revenues. The improvement in gross margin for Computation Products in the first nine months of 2005 was primarily due to a 38 percent increase in net sales described above.

 

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We record grants and allowances that we receive from the State of Saxony and the Federal Republic of Germany for Fab 30 or Fab 36, and we recorded the interest subsidies we received for Fab 30, as long-term liabilities on our financial statements. We amortize these amounts as they are earned as a reduction to operating expenses. We record the amortization of the production related grants and allowances as a credit to cost of sales. The credit to cost of sales totaled $18 million in the third quarter of 2005, $18 million in the second quarter of 2005 and $17 million in the third quarter of 2004. The credit to cost of sales totaled $54 million in the first nine months of 2005 and $48 million in the first nine months of 2004. The fluctuations in the recognition of these credits have not significantly impacted our gross margins.

 

We are currently capitalizing construction and facilitization costs related to Fab 36. Once Fab 36 begins producing revenue-generating products, which we anticipate will be in the first quarter of 2006, we will begin depreciating these costs to cost of sales.

 

This excerpt taken from the AMD 10-Q filed Aug 4, 2005.

Gross Margin

 

Gross margin of 39 percent in the second quarter of 2005 improved from 34 percent in the first quarter of 2005 and was relatively flat compared to 38 percent in the second quarter of 2004. The improvement in gross margin from the first quarter of 2005 was primarily due to an increase in average selling prices of six percent for our microprocessor products and the 12 percent increase in unit shipments of our Flash memory products, partially offset by an eight percent decrease in average selling prices for our Flash memory products. Gross margin of 37 percent in the first six months of 2005 was relatively flat compared to 38 percent in the first six months of 2004.

 

We record grants and allowances that we receive from the State of Saxony and the Federal Republic of Germany for Fab 30 or Fab 36, and we recorded the interest subsidies we received for Fab 30, as long-term liabilities on our financial statements. We amortize these amounts as they are earned as a reduction to operating expenses. We record the amortization of the production related grants and allowances as a credit to cost of sales. The credit to cost of sales totaled $18 million in the second quarter of 2005, $18 million in the first quarter of 2005 and $17 million in the second quarter of 2004. The credit to cost of sales totaled $36 million in the first six months of 2005 and $31 million in the first six months of 2004. The fluctuations in the recognition of these credits have not significantly impacted our gross margins.

 

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We are currently capitalizing construction and facilitization costs related to Fab 36. Once Fab 36 begins producing revenue-generating products, which we anticipate will be in the first quarter of 2006, we will begin depreciating these costs to cost of sales.

 

This excerpt taken from the AMD 10-Q filed May 6, 2005.

Gross Margin

 

Gross margin of 34 percent in the first quarter of 2005 declined from 41 percent in the fourth quarter of 2004 and from 38 percent in the first quarter of 2004. The decline in gross margin from the fourth quarter of 2004 was primarily due to a decrease in average selling prices of 18 percent for our Flash memory products. The decline in gross margin from the first quarter of 2004 was primarily due to a decrease of 29 percent in average selling prices for our Flash memory products.

 

We record grants and allowances that we receive from the State of Saxony and the Federal Republic of Germany for Fab 30 or Fab 36, and we recorded the interest subsidies we received for Fab 30, as long-term liabilities on our financial statements. We amortize these amounts as they are earned as a reduction to operating expenses. We record the amortization of the production related grants and allowances as a credit to cost of sales. The credit to cost of sales totaled $18 million in the first quarter of 2005, $19 million in the fourth quarter of 2004 and $14 million in the first quarter of 2004. The fluctuations in the recognition of these credits have not significantly impacted our gross margins.

 

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