Intel 2012 Annual Report Download - page 22
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ITEM 1A. RISK FACTORS
Changes in product demand may harm our financial results and are hard to predict.
If product demand decreases, our revenue and profit could be harmed. Important factors that could cause demand for our
products to decrease include changes in:
• business conditions, including downturns in the computing industry, regional economies, and the overall
economy;
• consumer confidence or income levels caused by changes in market conditions, including changes in government
borrowing, taxation, or spending policies; the credit market; or expected inflation, employment, and energy or other
commodity prices;
• the level of customers’ inventories;
• competitive and pricing pressures, including actions taken by competitors;
• customer product needs;
• market acceptance of our products and maturing product cycles; and
• the technology supply chain, including supply constraints caused by natural disasters or other events.
Our operations have high costs—including costs 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. If product demand decreases or we fail to forecast demand accurately, we
could be required to write off inventory or record excess capacity charges, which would lower our gross margin. Our
manufacturing or assembly and test capacity could be underutilized, and we may be required to write down our long-lived
assets, which would increase our expenses. Factory-planning decisions may shorten the useful lives of facilities and
equipment and cause us to accelerate depreciation. If product demand increases, we may be unable to add capacity fast
enough to meet market demand. These changes in product demand, and changes in our customers’ product needs, could
negatively affect our competitive position and may reduce our revenue, increase our costs, lower our gross margin
percentage, or require us to write down our assets.
We operate in highly competitive industries, and our failure to anticipate and respond to technological and
market developments could harm our ability to compete.
We operate in highly competitive industries that experience rapid technological and market developments, changes in
industry standards, changes in customer needs, and frequent product introductions and improvements. If we are unable to
anticipate and respond to these developments, we may weaken our competitive position, and our products or
technologies may be uncompetitive or obsolete. As computing market segments emerge, such as smartphones, tablets,
and consumer electronics devices, we face new sources of competition and customers with different needs than
customers in our PC business. Some of our competitors in these market segments are pursuing a vertical integration
strategy, incorporating their SoC solutions into the smartphones and tablets they offer, which could make it less likely that
they will adopt our SoC solutions. To be successful, we need to cultivate new industry relationships in these market
segments. As the number and variety of Internet-connected devices increase, we need to improve the cost, connectivity,
energy efficiency, and security of our platforms to succeed in these market segments. And we need to expand our
software capabilities to provide customers with comprehensive computing solutions.
To compete successfully, we must maintain a successful R&D effort, develop new products and production processes,
and improve our existing products and processes ahead of competitors. Our R&D efforts are critical to our success and
are aimed at solving complex problems, and we do not expect all of our projects to be successful. We may be unable to
develop and market new products successfully, and the products we invest in and develop may not be well received by
customers. Additionally, the products and technologies offered by others may affect demand for our products. These
types of events could negatively affect our competitive position and may reduce revenue, increase costs, lower gross
margin percentage, or require us to impair our assets.
Changes in the mix of products sold may harm our financial results.
Because of the wide price differences of platform average selling prices among our data center, PC client, and other Intel
architecture platforms, a change in the mix of platforms among these market segments may impact our revenue and
gross margin. For example, our PC client platforms that are incorporated in notebook and desktop computers tend to have
lower average selling prices and gross margin than our data center platforms that are incorporated in servers,
workstations and storage products. Therefore, if there is less demand for our data center platforms, and a resulting mix
shift to our PC client platforms, our gross margins and revenue would decrease. Also, more recently introduced products
tend to have higher costs because of initial development costs and lower production volumes relative to the previous
product generation, which can impact gross margin.