Intel 2008 Annual Report Download - page 21

Table of Contents
ITEM 1A. RISK FACTORS
Fluctuations in demand for our products may harm our financial results and are difficult to forecast.
Current uncertainty in global economic conditions poses a risk to the overall economy, as consumers and businesses have
deferred and may continue to defer purchases in response to tighter credit and less discretionary spending, which negatively
affect product demand and other related matters. If demand for our products fluctuates as a result of economic conditions or
for other reasons, our revenue and gross margin could be harmed. Important factors that could cause demand for our products
to fluctuate include:
If product demand decreases, our manufacturing or assembly and test capacity could be under-utilized, and we may be
required to record an impairment on our long-lived assets, including facilities and equipment, as well as intangible assets,
which would increase our expenses. In addition, if product demand decreases or we fail to forecast demand accurately, we
could be required to write off inventory or record under-utilization charges, which would have a negative impact on our gross
margin. Factory-planning decisions may shorten the useful lives of long-lived assets, including facilities and equipment, and
cause us to accelerate depreciation. In the long term, if product demand increases, we may not be able to add manufacturing or
assembly and test capacity fast enough to meet market demand. These changes in demand for our products, and changes in our
customers’
product needs, could have a variety of negative effects on our competitive position and our financial results, and, in
certain cases, may reduce our revenue, increase our costs, lower our gross margin percentage, or require us to recognize
impairments of our assets.
The recent financial crisis could negatively affect our business, results of operations, and financial condition.
The recent financial crisis affecting the banking system and financial markets and the going concern threats to financial
institutions have resulted in a tightening in the credit markets; a low level of liquidity in many financial markets; and extreme
volatility in credit, fixed income, and equity markets. There could be a number of follow-on effects from the credit crisis on
Intel’s business, including insolvency of key suppliers, resulting in product delays; inability of customers to obtain credit to
finance purchases of our products and/or customer insolvencies; counterparty failures negatively impacting our treasury
operations; increased expense or inability to obtain short-term financing of Intel’s operations from the issuance of commercial
paper; and increased impairment charges due to declines in the fair values of marketable debt or equity investments. The
current volatility in the financial markets and overall economic uncertainty increase the risk that the actual amounts realized in
the future on our debt and equity investments will differ significantly from the fair values currently assigned to them.
The semiconductor industry and our operations are characterized by a high percentage of costs that are fixed or difficult to
reduce in the short term, and by product demand that is highly variable and subject to significant downturns that may
harm our business, results of operations, and financial condition.
The semiconductor industry and our operations are characterized by high costs, such as those related to facility construction
and equipment, R&D, and employment and training of a highly skilled workforce, that are either fixed or difficult to reduce in
the short term. At the same time, demand for our products is highly variable and there have been downturns, often in
connection with maturing product cycles as well as downturns in general economic market conditions, such as the current
economic environment. These downturns have been characterized by reduced product demand, manufacturing overcapacity
and resulting excess capacity charges, high inventory levels, and lower average selling prices. The combination of these
factors may cause our revenue, gross margin, cash flow, and profitability to vary significantly in both the short and long term.
16
• changes in business and economic conditions, including a downturn in the semiconductor industry and/or the overall
economy;
• changes in consumer confidence caused by changes in market conditions, including changes in the credit market,
expectations for inflation, and energy prices;
•
changes in the level of customers
’
components inventory;
• competitive pressures, including pricing pressures, from companies that have competing products, chip architectures,
manufacturing technologies, and marketing programs;
•
changes in customer product needs;
•
strategic actions taken by our competitors; and
•
market acceptance of our products.