Intel 2006 Annual Report Download - page 25

Table of Contents
Our global operations subject us to risks that may negatively affect our results of operations and financial condition.
We have sales offices, research and development, manufacturing, and assembly and test facilities in many countries, and as a
result, we are subject to risks associated with doing business globally. Our global operations may be subject to risks that may
limit our ability to manufacture, assemble and test, design, develop, or sell products in particular countries, which could in turn
have an adverse effect on our results of operations and financial condition, including:
In addition, although most of our products are priced and paid for in U.S. dollars, a significant amount of certain types of
expenses, such as payroll, utilities, tax, and marketing expenses, are paid in local currencies. Our hedging programs reduce,
but do not always entirely eliminate, the impact of currency exchange rate movements, and therefore fluctuations in exchange
rates, including those caused by currency controls, could negatively impact our business operating results and financial
condition by resulting in lower revenue or increased expenses. In addition, changes in tariff and import regulations and to U.S.
and non-U.S. monetary policies may also negatively impact our revenue in those affected countries. Varying tax rates in
different jurisdictions could negatively impact our overall tax rate.
Failure to meet our production targets, resulting in undersupply or oversupply of products, may adversely impact our
business and results of operations.
Production of integrated circuits is a complex process. Disruptions in this process can result from difficulties in our
development and implementation of new processes, errors, and interruptions in the processes; defects in materials; and
disruptions in our supply of materials or resources—all of which could affect the timing of production ramps and yields.
Furthermore, we may not be successful or efficient in developing or implementing new production processes. The occurrence
of any of the foregoing may result in our failure to increase production as desired, resulting in higher costs or substantial
decreases in yields, which could impact our ability to produce sufficient volume to meet specific product demand.
Furthermore, the unavailability or reduced availability of certain products could make it more difficult to implement our
platform strategy. We may also experience increases in yields. A substantial increase in yields could result in higher inventory
levels and the possibility of resulting excess capacity charges as we slow production to reduce inventory levels. The
occurrence of any of these events could adversely impact our business and results of operations.
We may have difficulties obtaining the resources or products we need for manufacturing or assembling our products or
operating other aspects of our business, which could adversely affect our ability to meet demand for our products and may
increase our costs.
We have thousands of suppliers providing various materials that we use in production of our products and other aspects of our
business, and we seek, where possible, to have several sources of supply for all of these materials. However, we may rely on a
single or a limited number of suppliers, or upon suppliers in a single country, for these materials. The inability of such
suppliers to deliver adequate supplies of production materials or other supplies could disrupt our production processes or could
make it more difficult for us to implement our platform strategy. In addition, production could be disrupted by the
unavailability of the resources used in production, such as water, silicon, electricity, and gases. The unavailability or reduced
availability of the materials or resources we use in our business may require us to reduce production of products or may
require us to incur additional costs in order to obtain an adequate supply of these materials or resources. The occurrence of any
of these events could adversely impact our business and results of operations.
Costs related to product defects and errata may have an adverse impact on our results of operations and business.
Costs associated with unexpected product defects and errata (deviations from published specifications) include, for example,
the costs of:
These costs could be substantial and may therefore increase our expenses and adversely affect our gross margin. In addition,
our reputation with our customers or end users of our products could be damaged as a result of such product defects and errata,
and the demand for our products could be reduced. These factors could negatively impact our financial results and the
prospects for our business.
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security concerns, such as armed conflict and civil or military unrest, crime, political instability, and terrorist activity;
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health concerns;
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natural disasters;
• inefficient and limited infrastructure and disruptions, such as large-scale outages or interruptions of service from
utilities or telecommunications providers and supply chain interruptions;
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differing employment practices and labor issues;
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local business and cultural factors that differ from our normal standards and practices;
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regulatory requirements and prohibitions that differ between jurisdictions; and/or
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restrictions on our operations by governments seeking to support local industries, nationalization of our operations, and
restrictions on our ability to repatriate earnings.
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writing down the value of inventory of defective products;
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disposing of defective products that cannot be fixed;
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recalling defective products that have been shipped to customers;
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providing product replacements for or modifications to defective products; and/or
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defending against litigation related to defective products.