Advanced Micro Devices (AMD) 10-K risk factor changes: FY2019 vs FY2018

[removed: The] [added: *The] risks and uncertainties described below are not the only ones we face.

In addition, you should consider the interrelationship and compounding effects of two or more risks occurring [removed: simultaneously.][added: simultaneously.*]

[removed: Intel] [added: Intel] Corporation’s dominance of the microprocessor market and its aggressive business practices may limit our ability to compete [removed: effectively.][added: effectively.]

These aggressive activities have in the past [removed: and are likely in the future to result] [added: resulted] in lower unit sales and a lower average selling price for many of our products and adversely affect our margins and profitability.

We expect Intel to [removed: maintain its market position and to] continue to invest heavily in marketing, research and development, new manufacturing facilities and other technology companies.

Intel could also take actions that place our discrete [removed: GPUs] [added: graphics processing units (GPUs)] at a competitive disadvantage, including giving one or more of our competitors in the graphics market, such as Nvidia Corporation, preferential access to its proprietary graphics interface or other useful information.

Also, Intel [removed: recently] [added: has] announced that it is developing their own high-end discrete GPUs.

Intel’s position in the microprocessor market and integrated graphics chipset market, its introduction of competitive new products, its existing relationships with top-tier OEMs, and its aggressive marketing and pricing strategies could result in lower unit sales and [removed: a] lower average selling [removed: price] [added: prices] for our products, which could have a material adverse effect on us.

[removed: We] [added: We] have a wafer supply agreement with [removed: GF] [added: GLOBALFOUNDRIES Inc. (GF)] with obligations to purchase all of our microprocessor and [removed: APU] [added: accelerated processing unit (APU)] product [removed: requirements,] [added: requirements] and a certain portion of our [removed: GPU] [added: graphics processing unit (GPU)] product requirements manufactured at process nodes larger than 7 nanometer from GF, with limited exceptions.

If GF is not able to satisfy our manufacturing requirements, our business could be adversely [removed: impacted.][added: impacted.]

The wafer supply agreement (WSA) governs the terms by which we purchase products manufactured by [removed: GF.][added: GF and is in place until 2024.]

Pursuant to the WSA, we are required to purchase all of our microprocessor and APU product [removed: requirements,] [added: requirements] and a [added: certain] portion of our GPU product requirements from GF manufactured at process nodes larger than 7 nanometer (nm), with limited exceptions.

If we fail to meet the agreed wafer purchase target during a calendar [removed: year] [added: year,] we will be required to pay to GF a portion of the difference between our actual wafer purchases and the applicable annual purchase target.

[removed: We] [added: We] rely on third parties to manufacture our products, and if they are unable to do so on a timely basis in sufficient quantities and using competitive technologies, our business could be materially adversely [removed: affected.][added: affected.]

[removed: Accordingly, we depend on these suppliers to] allocate to us a portion of their manufacturing capacity sufficient to meet our needs, to produce products of acceptable quality and at acceptable manufacturing yields and to deliver those products to us on a timely basis and at acceptable prices.

We are party to two ATMP joint ventures (collectively, the [added: ATMP] JVs) with Tongfu [removed: Fujitsu] Microelectronics Co., Ltd. The majority of our ATMP services are provided by the JVs and there is no guarantee that the JVs will be able to fulfill our long-term ATMP requirements.

If we are unable to meet customer demand due to fluctuating or late supply from the [added: ATMP] JVs, it could result in lost sales and have a material adverse effect on our business.

[removed: Failure] [added: Failure] to achieve expected manufacturing yields for our products could negatively impact our financial [removed: results.][added: results.]

Our third-party [removed: foundries, including GF,] [added: foundries] are responsible for the process technologies used to fabricate silicon wafers.

We cannot be certain that our third-party foundries will be able to develop, obtain or successfully implement leading-edge process technologies needed to manufacture future generations of our products profitably or on a timely basis or that our competitors will not develop new technologies, products [added: or processes earlier.]

For example, we are presently focusing our [removed: 7nm] [added: 7 nanometer (nm)] product portfolio on Taiwan Semiconductor Co., Ltd.’s (TSMC) 7nm process.

If TSMC is not able to manufacture our [removed: products on] 7nm [added: products] in sufficient quantities to meet customer demand, it could have a material adverse effect on our business.

[removed: The] [added: The] success of our business is dependent upon our ability to introduce products on a timely basis with features and performance levels that provide value to our customers while supporting and coinciding with significant industry [removed: transitions.][added: transitions.]

Our product roadmap includes our next generation AMD [removed: Ryzen,] [added: Ryzen™,] AMD [removed: Radeon] [added: Radeon™] and AMD [removed: EPYC] [added: EPYC™] processors using [removed: 7 nm] [added: 7nm+] process technology.

If we fail to or are delayed in developing, qualifying or shipping new products or technologies that provide value to our customers and address these new trends or if we fail to predict which new form factors consumers will adopt and adjust our business accordingly, we may lose competitive positioning, which could cause us to lose market share and require us to discount the selling prices of our [removed: products.]

[removed: If] [added: If] we cannot generate sufficient revenue and operating cash flow or obtain external financing, we may face a cash shortfall and be unable to make all of our planned investments in research and development or other strategic [removed: investments.][added: investments.]

Credit agency downgrades or concerns regarding our credit worthiness may impact relationships with our suppliers, who may [added: limit our credit lines.]

[removed: The] [added: The] loss of a significant customer may have a material adverse effect on [removed: us.][added: us.]

If one of our key customers decides to stop buying our products, or if one of these customers materially reduces [removed: or reorganizes] its operations or its demand for our products, our business would be materially adversely affected.

[removed: Our] [added: Our] receipt of revenue from our semi-custom SoC products is dependent upon our technology being designed into third-party products and the success of those [removed: products.][added: products.]

Consequently, the semi-custom SoC product revenue expected by us may not be fully realized and our [removed: operating results may be adversely affected.]

[removed: Global] [added: Global] economic and market uncertainty may adversely impact our business and operating [removed: results.][added: results.]

[removed: Our] [added: Our] products may be subject to security vulnerabilities that could have a material adverse effect on [removed: us.][added: us.]

We also are subject to claims and litigation related to [added: Spectre] side-channel [removed: exploits, such as Spectre,] [added: exploits] and may face additional claims or litigation for future vulnerabilities.

[removed: IT] [added: IT] outages, data loss, data breaches and cyber-attacks could compromise our intellectual property or other sensitive information, be costly to remediate or cause significant damage to our business, reputation and [removed: operations.][added: operations.]

In the ordinary course of our business, we maintain sensitive data on our information technology (IT) assets, and also may maintain sensitive information on our business partners’ and [removed: third party] [added: third-party] providers’ IT assets, including our intellectual property and proprietary or confidential business information relating to our business and that of our customers and business partners.

Maintaining the security of this information is [removed: critical] [added: important] to our business and reputation.

We believe that companies have been increasingly subject to a wide variety of security incidents, cyber-attacks, hacking and phishing attacks, [added: business] and [added: system disruption attacks, and] other attempts to gain unauthorized access.

The [removed: integrity] [added: confidentiality] and [removed: protection] [added: integrity] of our worker and consumer data is [removed: critical] [added: important] to our business and our workers and consumers have a high expectation that we [removed: will] adequately protect their personal information.

A breach of data privacy [removed: is likely to] [added: may] cause significant disruption of our business operations.

As long as Intel remains in this dominant position, we may be materially adversely affected by Intel’s business practices, including rebating and allocation strategies and pricing actions, designed to limit our market share and margins; product mix and introduction schedules; product bundling, marketing and merchandising strategies; exclusivity payments to its current and potential customers, retailers and channel partners; de facto control over industry standards, and heavy influence on PC manufacturers and other PC industry participants, including motherboard, memory, chipset and basic input/output system (BIOS) suppliers and software companies as well as the graphics interface for Intel platforms; and marketing and advertising expenditures in support of positioning the Intel brand over the brand of its original equipment manufacturer OEM customers and retailers.

Accordingly, we depend on these suppliers to

operating results may be adversely affected.

The political, legal and economic risks associated with our operations in foreign countries include, without limitation: expropriation; changes in a specific country’s or region’s political or economic conditions; changes in tax laws, trade protection measures and import or export licensing requirements; difficulties in protecting our intellectual property; difficulties in managing staffing and exposure to different employment practices and labor laws; changes in foreign currency exchange rates; restrictions on transfers of funds and other assets of our subsidiaries between jurisdictions; changes in freight and interest rates; disruption in air transportation between the United States and our overseas facilities; loss or modification of exemptions for taxes and tariffs; and compliance with U.S. laws and regulations related to international operations, including export control and economic sanctions laws and regulations and the Foreign Corrupt Practices Act.

Government actions and regulations such as export administration regulations, tariffs, and trade protection measures, may limit our ability to export our products to certain customers.

In June 2019, the United States Commerce Department’s Bureau of Industry and Security (BIS) added certain Chinese entities to the Entity List, including THATIC and the THATIC JV.

In October 2019, the BIS added additional Chinese entities to the Entity List.

Specifically, United States-China trade relations remain uncertain.

The United States administration has announced tariffs on certain products imported into the United States with China as the country of origin, and China has imposed tariffs in response to the actions of the United States.

There is also a possibility of future tariffs, trade protection measures, import or export regulations or other restrictions imposed on our products or on our customers by the United States, China or other

A significant trade disruption or the establishment or increase of any tariffs, trade protection measures or restrictions could result in lost sales adversely impacting our reputation and business.

We anticipate ongoing and increasing costs related to: enhancing and implementing information security controls, including costs related to upgrading application, computer, and network security components; training workers to maintain and monitor our security controls; remediating any data security breach and addressing the related litigation; mitigating reputational harm; and compliance with external regulations, such as the European Union’s General Data Protection Regulation and the California Consumer Privacy Act.

Under the terms of the WSA, we have agreed to minimum annual wafer purchase targets through 2021.

Factors that may result in excess or obsolete inventory, which could result in write-downs of the value of our inventory, a reduction in the average selling price or a reduction in our gross margin include: a sudden or significant decrease in demand for our products; a production or design defect in our products; a higher incidence of inventory obsolescence because of rapidly changing technology and customer requirements; a failure to accurately estimate customer demand for our products, including for our older products as our new products are introduced; or our competitors introducing new products or taking aggressive pricing actions.

For example, historically, our net revenue has been generally higher in the second half of the year than in the first half of the year, although market conditions and product transitions could impact these trends.

The indenture governing our 7.50% Senior Notes due 2022 (7.50% Notes) contains various covenants which limit our ability to, among other things: incur additional indebtedness; pay dividends and make other restricted payments; make certain investments, including investments in our unrestricted subsidiaries; create or permit certain liens; create or permit restrictions on the ability of certain restricted subsidiaries to pay dividends or make other distributions to us; use the proceeds from sales of assets; enter

Our Secured Revolving Facility also contains various covenants which limit our ability to, among other things, incur additional indebtedness and liens, make certain investments, merge or consolidate with other entities, make certain dispositions, create any encumbrance on the ability of a subsidiary to make any upstream payments, make payments with respect to subordinated debt or certain borrowed money prior to its due date and enter into any non-arm’s-length transaction with an affiliate (in each case, except for certain customary exceptions).

Also, the semiconductor industry has seen several mergers and acquisitions over the last number of years.

Further consolidation could adversely impact our business due to there being fewer suppliers, customers and partners in the industry.

with our products are certified by Microsoft.

Our total debt principal amount as of December 28, 2019 was $0.6 billion.

our cash flow or obtain additional financing for future working capital, capital expenditures, acquisitions or other general corporate purposes; require us to use a substantial portion of our cash flow from operations to make debt service payments; place us at a competitive disadvantage compared to our competitors with relatively less debt; and increase our vulnerability to the impact of adverse economic and industry conditions.

As of December 28, 2019, $0.6 billion principal amount was outstanding under our notes.

We have incurred substantial losses in recent downturns, due to: substantial declines in average selling prices; the cyclical nature of supply and demand imbalances in the semiconductor industry; a decline in demand for end-user products (such as PCs) that incorporate our products; and excess inventory levels.

Moreover, if such acquisitions or joint

Furthermore, we may not achieve the objectives and expectations with respect to future operations, products and services.

In June 2019, the United States Commerce Department’s Bureau of Industry and Security added certain Chinese entities to the Entity List, including THATIC and the THATIC JV.

We are complying with U.S. law pertaining to the Entity List designation.

currently available from only a limited number of sources.

The Tax Cuts and Jobs Act of 2017 (the Tax Reform Act) contains many significant changes to the U.S. federal income tax laws, which the consequences of could have a material impact on the value of our deferred tax assets and could increase our future U.S. income tax expense.

As additional regulatory guidance is issued by the applicable taxing authorities and as new accounting treatment is clarified, we may report additional adjustments in the period if new information becomes available.

We have a significant amount of deferred tax assets and a portion of the deferred tax assets related to net operating losses or tax credits could be subject to limitations under Internal Revenue Code Section 382 or 383, separate return loss year rules, or dual consolidated loss rules.

The limitations could reduce the ability of the Company to be able to utilize the net operating losses or tax credits before the expiration of the tax attributes.

Tax law changes or the limitations could be material and could materially affect our tax obligations and effective tax rate.

Germany’s federal procurement office, in collaboration with the Bitkom trade association, issued new supply chain labor requirements.

As long as Intel remains in this dominant position, we may be materially adversely affected by Intel’s:

| | |

| --- | --- |

| • | business practices, including rebating and allocation strategies and pricing actions, designed to limit our market share and margins; |

- product mix and introduction schedules;

- product bundling, marketing and merchandising strategies;

- exclusivity payments to its current and potential customers, retailers and channel partners;

| • | de facto control over industry standards, and heavy influence on PC manufacturers and other PC industry participants, including motherboard, memory, chipset and basic input/output system (BIOS) suppliers and software companies as well as the graphics interface for Intel platforms; and |

| • | marketing and advertising expenditures in support of positioning the Intel brand over the brand of its original equipment manufacturer OEM customers and retailers. |

The WSA is in place until 2024.

In January 2019, we entered into the seventh amendment to the WSA with GF (the Seventh Amendment).

The Seventh Amendment modifies certain purchase commitments, pricing and other terms of the WSA applicable to wafer purchases at the 12 nm technology node and above by us for the period commencing January 1, 2019 and continuing through March 1, 2024.

or processes earlier.

limit our credit lines.

In addition, we are currently subject to claims and could be subject to additional claims in the future for damages resulting from loss of data from alleged vulnerabilities in the security of our processors.

We anticipate an increase in costs related to:

| • | enhancing and implementing information security controls, including costs related to upgrading application, computer, and network security components; |

- training workers to maintain and monitor our security controls;

- remediating any data security breach and addressing the related litigation;

- mitigating reputational harm; and

- compliance with external regulations.

For example, historically, first quarter PC product sales are generally lower than fourth quarter sales and with respect to our semi-custom SoC products for game consoles our sales pattern usually reflects higher sales in the second and third quarters compared to the first and fourth quarters.

Our total debt as of December 29, 2018 was $1.3 billion, net of unamortized debt issuance costs and unamortized debt discount associated with the 2.125% Notes.

Our large indebtedness may:

| • | limit our ability to borrow additional funds for working capital, capital expenditures, acquisitions and general corporate and other purposes; |

| • | limit our ability to use our cash flow or obtain additional financing for future working capital, capital expenditures, acquisitions or other general corporate purposes; |

- require us to use a substantial portion of our cash flow from operations to make debt service payments;

- place us at a competitive disadvantage compared to our competitors with relatively less debt; and

- increase our vulnerability to the impact of adverse economic and industry conditions.

The indentures governing our 6.75% Senior Notes due 2019 (6.75% Notes), 7.50% Senior Notes due 2022 (7.50% Notes) and 7.00% Senior Notes due 2024 (7.00% Notes) contain various covenants which limit our ability to, among other things:

- incur additional indebtedness;

- pay dividends and make other restricted payments;

- make certain investments, including investments in our unrestricted subsidiaries;

- create or permit certain liens;

| • | create or permit restrictions on the ability of certain restricted subsidiaries to pay dividends or make other distributions to us; |

- use the proceeds from sales of assets;

- consolidate or merge or sell our assets as an entirety or substantially as an entirety.

Our Secured Revolving Line of Credit also contains various covenants which limit our ability to, among other things, make certain investments, merge or consolidate with other entities and permit certain subsidiaries from incurring indebtedness.

In addition, further restrictions apply when certain payment conditions (the Payment Conditions) are not satisfied with respect to specified transactions, events or payments.

The Payment Conditions include that (i) no default or event of default exists and (ii) at all times during the 45 consecutive days immediately prior to such transaction, event or payment and on a pro forma basis after giving effect to such transaction, event or payment and any incurrence or repayment of indebtedness in connection therewith, the Excess Cash Availability (as defined in the Amended and Restated Loan Agreement) available cash is greater than the greater of 15% of the total commitment amount and $75 million.

The following discussion should be read in conjunction with the consolidated financial statements as of December [removed: 29, 2018] [added: 28, 2019] and December [removed: 30, 2017] [added: 29, 2018] and for each of the three years in the period ended December [removed: 29, 2018] [added: 28, 2019] and related notes, which are included in this Annual Report on Form 10-K as well as with the other sections of this Annual Report on Form 10-K, including “Part I, Item 1: Business,” “Part II, Item 6: Selected Financial Data” and “Part II, Item 8: Financial Statements and Supplementary Data.”

[removed: Introduction][added: Introduction]

In this [removed: management’s discussion and analysis (MD&A),] [added: section,] we will describe the [added: general financial condition and the] results of operations [removed: and the financial condition for us] [added: of Advanced Micro Devices, Inc.] and [removed: our consolidated subsidiaries,] [added: its wholly-owned subsidiaries (collectively, “us,” “our” or “AMD”),] including a discussion of our results of operations for [removed: 2018 compared to 2017 and 2017] [added: 2019] compared to [removed: 2016,] [added: 2018,] an analysis of changes in our financial condition and a discussion of our contractual obligations and [removed: off balance] [added: off-balance] sheet arrangements.

[removed: Overview][added: Overview]

Net revenue for [removed: 2018] [added: 2019] was [removed: $6.5] [added: $6.7] billion, an increase of [removed: 23%] [added: 4%] compared to [removed: 2017] [added: 2018] net revenue of [removed: $5.3] [added: $6.5] billion.

Gross margin, as a percentage of net revenue for [removed: 2018,] [added: 2019,] was [removed: 38%, a 4% increase] [added: 43%,] compared to [removed: 34%] [added: 38%] in [removed: 2017.][added: 2018.]

Our operating income for [removed: 2018] [added: 2019] improved to [removed: $451] [added: $631] million compared to operating income of [removed: $127] [added: $451] million for [removed: 2017.][added: 2018.]

Our net income for [removed: 2018] [added: 2019] improved to [removed: $337] [added: $341] million compared to [removed: a net loss of $33] [added: $337] million in the prior year.

Cash, cash equivalents and marketable securities as of December [removed: 29, 2018] [added: 28, 2019] were [removed: $1.16] [added: $1.5] billion, [removed: down] [added: up] from [removed: $1.18] [added: $1.2] billion at the end of [removed: 2017.][added: 2018.]

Principal amount of total debt as of December [removed: 29, 2018] [added: 28, 2019] was [removed: $1.53 billion,] [added: $563 million,] compared to [removed: $1.70] [added: $1.5] billion as of December [removed: 30, 2017.][added: 29, 2018.]

[removed: Critical] [added: Critical] Accounting [removed: Estimates][added: Estimates]

Although actual results have historically been reasonably consistent with [added: management’s expectations, the actual results may differ from these estimates or our estimates may be affected by different assumptions or conditions.]

[removed: In accordance with the adoption of the new revenue standard effective the beginning of the first quarter of 2018, we now] [added: *Revenue recognition.* We] recognize revenue upon the shipment of the product to our distributors (sell-in), rather than upon the resale of the product by our distributors to their customers (sell-through).

[added: *Revenue Allowances.*] We record a provision for estimated sales returns and allowances on product sales for estimated future price reductions and other customer incentives in the same period that the related revenues are recorded.

[added: *Inventory Valuation.*] At each balance sheet date, we evaluate our ending inventories for excess quantities and obsolescence based on projected sales outlook.

We adjust the remaining specific inventory balances to approximate the lower of our [removed: standard manufacturing] [added: actual] cost or [added: estimated] net realizable value.

Among other factors, management considers [added: recent historical activity as well as anticipated or] forecasted [removed: demand in relation to the inventory on hand,] [added: demand, estimates of future selling prices,] competitiveness of product offerings, market [removed: conditions] and [added: industry conditions, customer requirements and] product life cycles when determining [added: excess,] obsolescence and [added: net] realizable [removed: value.][added: value in relation to the inventory on hand.]

[added: *Goodwill.*] We perform our goodwill impairment analysis as of the first day of the fourth quarter of each year and, if certain events or circumstances indicate that an impairment loss may have been incurred, on a more frequent basis.

[removed: If] [added: Unless] recovery is [removed: not likely,] [added: considered more-likely-than-not (a probability level of more than 50%),] we [removed: must increase our] [added: will record a] charge to income tax expense in the form of a valuation allowance for the deferred tax assets that we estimate will not ultimately be [removed: recoverable.][added: recoverable or maintain the valuation allowance recorded in prior periods.]

[removed: We] [added: In determining the need to establish or maintain a valuation allowance, we] consider [added: multiple factors including] past performance, [added: the reversal of deferred tax liabilities, tax planning strategies, and] future expected taxable [removed: income and prudent and feasible tax planning strategies in determining the need for a valuation allowance.][added: income.]

[removed: Results] [added: Results] of [removed: Operations][added: Operations]

We report our financial performance based on the following two reportable [removed: segments:the] [added: segments: the] Computing and Graphics segment and the Enterprise, Embedded and Semi-Custom segment.

The following table provides a summary of net revenue and operating income (loss) by segment for [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016.][added: 2017.]

| | [removed: 2018] [added: 2019] | | | | [removed: 2017] [added: 2018] | | | | [removed: 2016] [added: 2017] | | |

| | [removed: (In millions)] [added: (In millions)] | | | | | | | | | | |

| Computing and Graphics | $ | [removed: 4,125] [added: 4,709] | | | $ | [removed: 2,977] [added: 4,125] | | | $ | [removed: 1,988] [added: 2,977] | |

| Enterprise, Embedded and Semi-Custom | [removed: 2,350] [added: 2,022] | | | | [removed: 2,276] [added: 2,350] | | | | [removed: 2,331] [added: 2,276] | | |

| Total net revenue | $ | [removed: 6,475] [added: 6,731] | | | $ | [removed: 5,253] [added: 6,475] | | | $ | [removed: 4,319] [added: 5,253] | |

| Computing and Graphics | $ | [removed: 470] [added: 577] | | | $ | [removed: 92] [added: 470] | | | $ | [removed: (243] [added: 92] | [removed: )] |

| Enterprise, Embedded and Semi-Custom | [removed: 163] [added: 263] | | | | [removed: 132] [added: 163] | | | | [removed: 287] [added: 132] | | |

| All Other | [removed: (182] [added: (209] | | ) | | [removed: (97] [added: (182] | | ) | | [removed: (417] [added: (97] | | ) |

| Total operating income [removed: (loss)] | $ | [removed: 451] [added: 631] | | | $ | [removed: 127] [added: 451] | | | $ | [removed: (373] [added: 127] | [removed: )] |

[removed: Computing] [added: Computing] and [removed: Graphics][added: Graphics]

Computing and Graphics net revenue of [removed: $4.1] [added: $4.7] billion in [removed: 2018] [added: 2019] increased by [removed: 39%,] [added: 14%,] compared to [removed: $3.0] [added: $4.1] billion in [removed: 2017,] [added: 2018,] primarily as a result of a [removed: 15%] [added: 22%] increase in average selling price and a [removed: 17%] [added: 4%] increase in unit shipments.

The increase in average selling price [removed: and unit shipments] was primarily driven by [removed: higher] [added: a richer mix of client processors due to strong] demand [removed: for] [added: of] our [removed: Ryzen™] [added: Ryzen] processors.

The increase in unit shipments was primarily [removed: attributable] [added: due] to higher demand for our [added: Ryzen processors, partially offset by lower demand for our] Radeon graphics products.

Computing and Graphics operating income was [removed: $470] [added: $577] million in [removed: 2018] [added: 2019] compared to operating income of [removed: $92] [added: $470] million in [removed: 2017.][added: 2018.]

The [removed: improvement] [added: increase] in operating income was primarily driven by higher [removed: demand for Ryzen and Radeon products as customers continued to adopt our new products,] [added: sales,] partially offset by a [removed: $195] [added: $194] million increase in operating expenses.

Operating expenses increased for the reasons [removed: set forth] [added: outlined] under “Expenses” below.

[removed: Enterprise,] [added: Enterprise,] Embedded and [removed: Semi-Custom][added: Semi-Custom]

Discussions of 2017 items and year-to-year comparisons between 2018 and 2017 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 29, 2018.

2019 marked a milestone in our multi-year journey with the launch of our 7 nanometer (nm) product portfolio.

We executed our product roadmap and introduced a number of high-performance products in 2019.

For the PC market, we introduced the 3rd Gen AMD Ryzen™ desktop processor family based on the new Zen 2 core architecture with AMD chiplet design approach.

In addition to our mainstream PC product family, we introduced the next generation of the Ryzen™ Threadripper™ product line designed for the high-end desktop segment for creators and enthusiasts.

We announced our second-generation AMD Ryzen™ 3000 Series notebook processors, powering ultrathin, commercial and gaming notebooks.

A number of high-performance graphics products were also launched in 2019.

We introduced the AMD Radeon™ VII, a premium graphics card for gamers, creators and enthusiasts.

We also announced the availability of the AMD Radeon™ RX 5700-series gaming graphics card family, the AMD Radeon™ RX 5500 series that will be available in desktop PCs from major PC manufacturers as well as the Radeon™ 5500M GPU for notebook PCs.

Our AMD Radeon™ Pro Vega II GPU is designed to power demanding professional applications.

We also announced the AMD Radeon™ Pro W5700, a 7nm professional PC workstation graphics card that enables 3D professionals to visualize and interact with their designs in real time.

For the server market, we introduced the 2nd Gen AMD EPYC™ family of processors that feature up to 64 “Zen 2” cores in 7nm process technology for performance and are designed to reduce total cost of ownership (TOC) by up to 50%.

We made significant progress towards improving our balance sheet in 2019 as we reduced our debt.

*Income Taxes*.

When considering all available evidence, if it is determined we can more-likely-than-not realize our deferred tax assets, we will reverse the existing valuation allowance, which would result in a credit to income tax expense and the establishment of an asset in the period of reversal.

Historically, our net revenue has been generally higher in the second half of the year than in the first half of the year, although market conditions and product transitions could impact these trends.

Enterprise, Embedded and Semi-Custom net revenue of $2.0 billion in 2019 decreased by 14% compared to net revenue of $2.4 billion in 2018, primarily as a result of lower semi-custom product revenue, partially offset by higher sales of our EPYC server processors.

gain of $60 million recognized in the first quarter of 2019, partially offset by lower semi-custom product revenue and a $37 million increase in operating expenses.

Operating expenses increased for the reasons outlined under “Expenses” below.

All Other operating loss of $209 million in 2019 included $197 million of stock-based compensation expense and a $12 million contingent loss accrual on a legal matter.

| | 2019 | | | | 2018 | | | | 2017 | | |

The increase was primarily due to an increase in product development costs in both the Computing and Graphics and Enterprise, Embedded and Semi-Custom segments as well as an increase in stock-based compensation expense.

The increase was primarily due to an increase in go-to-market activities in both the Computing and Graphics and Enterprise, Embedded and Semi-Custom segments, as well as an increase in stock-based compensation expense.

Licensing Gain

During 2019, we recognized $60 million as licensing gain associated with the licensed IP to THATIC JV.

Other expense, net increased in 2019 by $165 million from net of zero in 2018.

The change from 2018 to 2019 was primarily due to $176 million of loss on redemption, repurchases and conversions of debt in 2019.

The income tax provision in 2019 was primarily due to $22 million of withholding taxes related to cross-border transactions and $22 million of foreign income taxes in profitable locations partially offset by a $13 million benefit for a reduction of U.S. income taxes accrued in the prior year.

As we continue to make progress in our business resulting in improved financial results, our future reassessment could possibly result in a determination that a valuation allowance is no longer required.

The impact of the determination would result in the release of the valuation allowance and significant financial impact in a future reporting period with a material non-cash income tax benefit and the recording of additional deferred tax assets on our consolidated balance sheet.

| | 2019 | | | | 2018 | | | | 2017 | | |

| | (In millions) | | | | | | | | | | |

Net cash provided by financing activities was $43 million in 2019, which primarily consisted of a cash inflow of $449 million from the warrant exercised by West Coast Hitech L.P. (WCH) and $74 million from the issuance of common stock under our stock-based compensation equity plans, partially offset by $473 million of cash used for debt reduction activities during the year.

| Term debt | $ | 563 | | | $ | — | | | $ | — | | | $ | 312 | | | $ | — | | | $ | — | | | $ | 251 | |

| Purchase obligations (3) | 2,290 | | | | 1,677 | | | | 592 | | | | 10 | | | | 4 | | | | 2 | | | | 5 | | |

| Total contractual obligations (4) | $ | 3,397 | | | $ | 1,815 | | | $ | 720 | | | $ | 435 | | | $ | 48 | | | $ | 41 | | | $ | 338 | |

| | | |

| --- | --- | --- |

| | | |

| (1) | | Represents interest obligations, payable in cash, for our outstanding debt. |

We are a global semiconductor company primarily offering:

| | |

| --- | --- |

| • | x86 microprocessors, as standalone devices or as incorporated into an accelerated processing unit (APU), chipsets, discrete and integrated graphics processing units (GPUs), and professional GPUs; and |

| • | server and embedded processors, semi-custom System-on-Chip (SoC) products and technology for game consoles. |

We also license portions of our intellectual property (IP) portfolio.

Our 2018 financial results demonstrate the success of our strong product roadmap execution.

Customers continued to adopt our high performance products as new products accounted for over 65% of our annual 2018 revenue.

We significantly expanded our desktop processor offerings in 2018 with the launch of our second-generation AMD Ryzen and high-end AMD Ryzen Threadripper™ WX processors for gamers, creators and hardware enthusiasts.

We announced the availability of our first desktop consumer and commercial Ryzen and Ryzen PRO APUs that combine our high-performance “Zen” CPU and Radeon “Vega” graphics cores into a single chip.

We also introduced the first entry-level processors based on our “Zen” CPU and “Vega” GPU cores for the consumer and commercial desktop PC market with the AMD Athlon™ and AMD PRO processors.

In the notebook market, multiple customers launched premium consumer and commercial PCs featuring our mobile AMD Ryzen APUs, including our first enterprise-class notebooks powered by our new AMD Ryzen PRO APUs.

For the high-performance embedded markets, we introduced the AMD EPYC™ Embedded 3000 processor and AMD Ryzen Embedded V1000 processor families that bring new levels of computing and graphics performance to the thin client, digital signage, and infrastructure markets.

management’s expectations, the actual results may differ from these estimates or our estimates may be affected by different assumptions or conditions.

Revenue recognition.

Revenue Allowances.

Inventory Valuation.

Goodwill.

Income Taxes.

In December 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act of 2017 (Tax Reform Act).

The legislation significantly changes U.S. tax law by, among other things, lowering corporate income tax rates, implementing a modified territorial tax system and imposing a transition tax on deemed repatriated earnings of foreign subsidiaries.

The Tax Reform Act permanently reduces the U.S. corporate income tax rate from a maximum of 35% to a flat 21% rate, effective January 1, 2018.

The SEC staff issued Staff Accounting Bulletin No. 118 (SAB 118) to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Reform Act.

More specifically, SAB 118 allowed companies to record provisional amounts during a measurement period that is similar to the measurement period used when accounting for business combinations.

As a result, we have recognized the provisional tax impacts related to deemed repatriated earnings and the revaluation of deferred tax assets and liabilities in our consolidated financial statements for the year ended December 30, 2017.

During 2018, we finalized our computation of the impact of the Tax Reform Act.

In January 2018, the FASB released guidance on the accounting for tax on the global intangible low-taxed income (GILTI) provisions of the Tax Reform Act.

The GILTI provisions impose a tax on foreign income in excess of a deemed return on tangible assets of foreign corporations.

The guidance allows companies to make an accounting policy election to either (i) account for GILTI as a component of tax expense in the period in which they are subject to the rules (the period cost method), or (ii) account for GILTI in the Company’s measurement of deferred taxes (the deferred method).

After completing the analysis of the GILTI provisions, we elected to account for GILTI using the period cost method.

Historically, first quarter PC product sales were generally lower than fourth quarter sales and with respect to our semi-custom SoC products for game consoles our sales pattern usually reflects higher sales in the second and third quarters compared to the first and fourth quarters.

Computing and Graphics net revenue of $3.0 billion in 2017 increased by 50%, compared to $2.0 billion in 2016 as a result of a 38% increase in average selling price and a 1% increase in unit shipments.

The increase in the average selling price was primarily driven by Ryzen desktop processor and Radeon graphics products sales.

Computing and Graphics operating income was $92 million in 2017, compared to an operating loss of $243 million in 2016.

The improvement in operating results was primarily due to the increase in net revenue referenced above, partially offset by the related increase in cost of sales and operating expenses.

Enterprise, Embedded and Semi-Custom net revenue of $2.4 billion in 2018 increased by 3% compared to net revenue of $2.3 billion 2017.

Enterprise, Embedded and Semi-Custom net revenue of $2.28 billion in 2017 decreased by 2% compared to net revenue of $2.33 billion in 2016.

IP related revenue and sales of our EPYC datacenter processors, which were launched in June of 2017, were mostly offset by a decrease in non-recurring engineering (NRE) revenue and lower sales of our semi-custom SoC products.

The improvement in operating income was due primarily to richer server and semi-custom product mix, partially offset by a $50 million increase in operating expenses and lower IP-related revenue.

In 2017, operating income also included a licensing gain of $52 million.

[added: *Interest Rate Risk.*] Our exposure to market risk for changes in interest rates relates primarily to our investment portfolio and long-term debt.

As of December [removed: 29, 2018,] [added: 28, 2019,] our investment portfolio consisted primarily of commercial paper.

As of December [removed: 29, 2018,] [added: 28, 2019,] all of our outstanding [removed: long term] [added: long-term] debt had fixed interest rates.

[added: *Default Risk.*] We mitigate default risk in our investment portfolio by investing in only high credit quality securities and by constantly positioning our portfolio to respond to a significant reduction in a credit rating of any investment issuer or guarantor.

As of December [removed: 29, 2018,] [added: 28, 2019,] substantially all of our investments in debt securities were A-rated by at least one of the rating agencies.

The following table presents [removed: the cost basis, fair value and related weighted-average interest rates by year of maturity] [added: certain information] for our investment portfolio and debt obligations as of December [removed: 29, 2018:][added: 28, 2019:]

| | [removed: 2019] [added: 2020] | | | | [removed: 2020] [added: 2021] | | | | [removed: 2021] [added: 2022] | | | | [removed: 2022] [added: 2023] | | | | [removed: 2023] [added: 2024] | | | | [removed: 2024] [added: 2025] and [removed: thereafter] [added: thereafter] | | | | [removed: Total] [added: Total (1)] | | | | [removed: 2018] [added: 2019] Fair [removed: Value] [added: Value (2)] | | |

| | [removed: (In] [added: (In] millions, except for [removed: percentages)] [added: percentages)] | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| [removed: Investment Portfolio] [added: Investment Portfolio] | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| [removed: Cash equivalents:] [added: Cash equivalents:] | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Fixed rate amounts | $ | [removed: 488] [added: 37] | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | [removed: 488] [added: 37] | | | $ | [removed: 488] [added: 37] | |

| Weighted-average rate | [removed: 2.45] [added: 1.83] | | % | | — | | [added: %] | | — | | [added: %] | | — | | [added: %] | | — | | [added: %] | | — | | [added: %] | | [removed: 2.45] [added: 1.83] | | % | | | | |

| Variable rate amounts | $ | [removed: 312] [added: 1,425] | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | [removed: 312] [added: 1,425] | | | $ | [removed: 312] [added: 1,425] | |

| Weighted-average rate | [removed: 2.29] [added: 2.13] | | % | | — | | [added: %] | | — | | [added: %] | | — | | [added: %] | | — | | [added: %] | | — | | [added: %] | | [removed: 2.29] [added: 2.13] | | % | | | | |

| [removed: Marketable securities] [added: Marketable securities] | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Fixed rate amounts | $ | [removed: 78] [added: —] | | | $ | — | | | $ | [removed: —] [added: 312] | | | $ | — | | | $ | — | | | $ | [removed: —] [added: 251] | | | $ | [removed: 78] [added: 563] | | | $ | [removed: 78] [added: 1,823] | |

| [removed: Total] [added: Total] Investment [removed: Portfolio] [added: Portfolio] | [removed: $] [added: $] | [removed: 878] [added: 1,462] | | | [removed: $] [added: $] | [removed: —] [added: —] | | | [removed: $] [added: $] | [removed: —] [added: —] | | | [removed: $] [added: $] | [removed: —] [added: —] | | | [removed: $] [added: $] | [removed: —] [added: —] | | | [removed: $] [added: $] | [removed: —] [added: —] | | | [removed: $] [added: $] | [removed: 878] [added: 1,462] | | | [removed: $] [added: $] | [removed: 878] [added: 1,462] | |

| [removed: Debt Obligations] [added: Debt Obligations] | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Weighted-average effective interest rate | [removed: 6.75] [added: —] | | % | | — | | % | | [removed: —] [added: 7.50] | | % | | [removed: 7.50] [added: —] | | % | | — | | % | | [removed: 3.28] [added: 2.125] | | % | | [removed: 4.41] [added: 5.10] | | % | | | | |

[added: *Foreign Exchange Risk.*] As a result of our foreign operations, we incur costs and we carry assets and liabilities that are denominated in foreign currencies, while sales of products are primarily denominated in U.S. dollars.

We designate these contracts as cash flow hedges of forecasted expenses to the extent eligible [added: under the accounting rules and evaluate hedge effectiveness prospectively and retrospectively.]

[removed: As such, the effective portion of the gain or loss on these contracts is reported as a component of accumulated other comprehensive income (loss) and] reclassified to earnings in the same line item as the associated forecasted transaction and in the same period during which the hedged transaction affects earnings.

The following table provides information about our foreign currency forward contracts as of December [removed: 29, 2018] [added: 28, 2019] and December [removed: 30, 2017.][added: 29, 2018.]

| | [removed: December 29, 2018] [added: December 28, 2019] | | | | | | | | | | | [removed: December 30, 2017] [added: December 29, 2018] | | | | | | | | | |

| | [removed: Notional Amount] [added: Notional Amount] | | | | [removed: Average Contract Rate] [added: Average Contract Rate] | | | [removed: Estimated Fair Value Gain (Loss)] [added: Estimated Fair Value Gain (Loss)] | | | | [removed: Notional Amount] [added: Notional Amount] | | | | [removed: Average Contract Rate] [added: Average Contract Rate] | | | [removed: Estimated Fair Value Gain (Loss)] [added: Estimated Fair Value Gain (Loss)] | | |

| | [removed: (In] [added: (In] millions except contract [removed: rates)] [added: rates)] | | | | | | | | | | | | | | | | | | | | |

| Canadian Dollar | [removed: $] [added: 249] | [removed: 110] | | | [removed: 1.3007] [added: 1.3183] | | | [removed: $] [added: 2] | [removed: (5] | [removed: )] | | [removed: $] [added: 110] | [removed: 111] | | | [removed: 1.2751] [added: 1.3007] | | | [removed: $] [added: (5] | [removed: 2] | [added: )] |

| Malaysian Ringgit | [removed: 12] [added: —] | | | | [removed: 4.1775] [added: 4.0889] | | | — | | | | [removed: —] [added: 12] | | | | [removed: —] [added: 4.1775] | | | — | | |

| Indian Rupee | [removed: 45] [added: 76] | | | | [removed: 72.2338] [added: 72.9476] | | | — | | | | [removed: 33] [added: 45] | | | | [removed: 66.1548] [added: 72.2338] | | | [removed: 1] [added: —] | | |

| Singapore Dollar | [removed: 26] [added: 50] | | | | [removed: 1.3478] [added: 1.3597] | | | — | | | | [removed: 23] [added: 26] | | | | [removed: 1.3553] [added: 1.3478] | | | — | | |

| Taiwan Dollar | [removed: 21] [added: 38] | | | | [removed: 29.6490] [added: 30.1873] | | | — | | | | [removed: 18] [added: 21] | | | | [removed: 29.6586] [added: 29.6490] | | | — | | |

| Chinese Renminbi | [removed: 182] [added: $] | [added: 277] | | | [removed: 6.5733] [added: 6.9890] | | | [removed: (3] [added: $] | [added: (1] | ) | | [removed: 115] [added: $] | [added: 182] | | | [removed: 6.7972] [added: 6.5733] | | | [removed: 4] [added: $] | [added: (3] | [added: )] |

| [removed: Total] [added: Total] | [removed: $] [added: $] | [removed: 396] [added: 739] | | | | | | [removed: $] [added: $] | [removed: (8] [added: 2] | [removed: )] | | [removed: $] [added: $] | [removed: 300] [added: 396] | | | | | | [removed: $] [added: $] | [removed: 7] [added: (8] | [added: )] |

| Total Debt Obligations | $ | — | | | $ | — | | | $ | 312 | | | $ | — | | | $ | — | | | $ | 251 | | | $ | 563 | | | $ | 1,823 | |

| | | |

| --- | --- | --- |

| | | |

| (1) | | The dollar amounts represent the cost basis of our investment portfolio and the remaining principal of our debt obligations. |

| | | |

| (2) | | Our 2.125% Notes, included in debt obligations above, were convertible at the option of the holder as of December 28, 2019. The estimated fair value of the 2.125% Notes takes into account the value of our stock price of $46.18 as of December 28, 2019 and the initial conversion price of approximately $8.00 per share of common stock. |

To the extent such hedges are effective, the gain or loss on these contracts is recorded as a component of accumulated other comprehensive income (loss) and

| Euro | 48 | | | | 0.8927 | | | 1 | | | | — | | | | — | | | — | | |

| Pound Sterling | 1 | | | | 0.7614 | | | — | | | | — | | | | — | | | — | | |

Interest Rate Risk.

Default Risk.

There were no significant sales of available-for-sale securities during 2018.

| Weighted-average rate | 2.77 | | % | | — | | | | — | | | | — | | | | — | | | | — | | | | 2.77 | | % | | | | |

| Fixed rate amounts | $ | 66 | | | $ | — | | | $ | — | | | $ | 337 | | | $ | — | | | $ | 1,055 | | | $ | 1,458 | | | $ | 2,494 | |

| Variable rate amounts | $ | 70 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 70 | | | $ | 70 | |

| Weighted-average effective interest rate | 6.00 | | % | | — | | % | | — | | % | | — | | % | | — | | % | | — | | % | | 6.00 | | % | | | | |

| Total Debt Obligations | $ | 136 | | | $ | — | | | $ | — | | | $ | 337 | | | $ | — | | | $ | 1,055 | | | $ | 1,528 | | | $ | 2,564 | |

Foreign Exchange Risk.

under the accounting rules and evaluate hedge effectiveness prospectively and retrospectively.

Any ineffective portion is immediately recorded in earnings.

[removed: Cautionary] [added: Cautionary] Statement Regarding Forward-Looking [removed: Statements][added: Statements]

[removed: The] [added: *The] statements in this report include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

The forward-looking statements relate to, among other things: possible impact of future accounting rules on AMD’s consolidated financial statements; demand for AMD’s products; the growth, change and competitive landscape of the markets in which AMD participates; the [removed: nature and extent of AMD’s future payments to GLOBALFOUNDRIES Inc. (GF) and the materiality of these payments; the materiality of AMD’s future purchases from GF; AMD’s ability to meet its wafer purchase target; the] expected amounts to be received by AMD under the IP licensing agreement and AMD’s expected royalty payments from future product sales of China JVs’ products to be developed on the basis of such licensed IP; sales patterns of AMD’s PC products and semi-custom System-on-Chip (SoC) products for game consoles; [removed: the level of] international sales [removed: as compared to total sales; international sales] will continue to be a significant portion of total sales in the foreseeable future; [removed: that other unrecognized] [added: the balance of the uncertain] tax benefits [removed: will not materially change] in the next 12 months; that AMD’s [removed: cash and] [added: cash,] cash equivalents [added: and marketable securities] balances together with the availability under that certain [removed: secured] revolving [removed: line of] credit [added: facility] (Secured Revolving [removed: Line of Credit)] [added: Facility)] made available to AMD and certain of its subsidiaries under the [removed: Amended and Restated Loan] [added: Credit] Agreement, will be sufficient to fund AMD’s operations including capital expenditures over the next 12 months; AMD’s ability to obtain sufficient external financing on favorable terms, or at all; AMD’s expectation that based on the information presently known to management, the potential liability related to AMD’s current litigation will not have a material adverse effect on its financial condition, cash flows or results of operations; any amounts in addition to what has been already accrued by AMD for future remediation costs under clean-up orders will not be material; we expect to file future patent applications in both the United States and abroad on significant [removed: inventions,] [added: inventions] as we deem appropriate; anticipated [removed: increase] [added: ongoing and increased] in costs related to [removed: enhancing, implementing] [added: enhancing] and [removed: monitoring] [added: implementing] information security [removed: controls, remediating any data security breaches and addressing related litigation, mitigating reputational harm and compliance with external regulations related to our IT assets; we expect to receive $448.5 million upon the exercise of a warrant by West Coast Hitech L.P. (WCH) and issue 75 million shares of our common stock to WCH;] [added: controls;] revenue allocated to remaining performance obligations that are unsatisfied which will be recognized over the next 12 months; [added: all unbilled accounts receivables are expected to be billed] and [added: collected within 12 months; and] a small number of customers will continue to account for a substantial part of AMD’s revenue in the future.

We assume no obligation to update forward-looking [removed: statements.][added: statements.*]

[removed: General][added: General]

- x86 microprocessors, as standalone devices or as incorporated into an accelerated processing unit (APU), [removed: chipsets;] [added: chipsets,] discrete and integrated graphics processing units (GPUs), [added: data center] and professional [removed: GPUs;] [added: GPUs,] and [added: development services; and]

- server and embedded [removed: processors and] [added: processors,] semi-custom System-on-Chip (SoC) [removed: products] [added: products, development services] and technology for game consoles.

We also license portions of our intellectual property [added: (IP)] portfolio.

References in this report to [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016] [added: 2017] refer to the fiscal year unless explicitly stated otherwise.

[removed: Additional Information][added: Additional Information]

AMD, the AMD Arrow logo, Athlon, EPYC, FirePro, FreeSync, Geode, [removed: LiquidVR,] Opteron, Radeon, Ryzen, Threadripper, [added: Infinity Fabric,] and combinations thereof are trademarks of Advanced Micro Devices, Inc. [removed: Microsoft, Windows, Direct X, Xbox 360 and Xbox One are trademarks or registered trademarks of Microsoft Corporation in the United States and other jurisdictions.]

PlayStation is a registered trademark [added: or trademark] of Sony Interactive Entertainment, Inc..

[removed: Wii] [added: Chromebook] and [removed: Wii U] [added: Stadia] are [removed: registered] trademarks of [removed: Nintendo of America,] [added: Google] Inc. [removed: ARM] [added: Cray] is a [removed: registered] trademark of [removed: ARM Limited] [added: Cray Inc. and is registered] in the [removed: EU] [added: United States] and other countries.

[removed: Website] [added: Website] Access to Our SEC Filings and Corporate Governance [removed: Documents][added: Documents]

[removed: Our Industry][added: Our Industry]

[removed: The x86] [added: Competition in the] Microprocessor and Chipset [removed: Markets][added: Market]

[removed: Central] [added: Central] Processing Unit [removed: (CPU).][added: (CPU).]

instructions simultaneously, the bit size of its instruction [removed: set (e.g., 32-bit vs 16-bit),] [added: set,] memory size and data access speed.

[added: Graphics Processing Unit (GPU).] A GPU is a programmable logic chip that helps render images, animations and video and is increasingly being used to handle general computing tasks.

The more sophisticated the GPU, the higher the resolution and the faster and smoother moving objects can be displayed on video display or in a virtual environment [removed: (virtual] [added: (e.g. virtual] reality (VR) and augmented reality (AR)).

In addition to graphics processing, GPUs are used to perform parallel operations on multiple sets of data and are increasingly used to perform vector processing for non-graphics applications that require repetitive computations such as supercomputing, deep learning, artificial and machine intelligence, blockchain and various other applications (e.g., cryptocurrency [removed: mining,] [added: mining and] autonomous driving).

[added: Accelerated Processing Unit (APU).] Consumers increasingly demand computing devices with improved end-user experience, system performance and energy efficiency.

[removed: System-on-Chip (SoC).][added: System-on-Chip (SoC).]

[added: Chipset.] A chipset is a generic term referring to a device or a collection of devices that allow the microprocessor to connect to a wider range of peripheral devices in the system (such as storage, optical drives, and Universal Serial Bus (USB) peripherals).

In addition, we believe our customers also benefit from an all-AMD platform (consisting of an APU or CPU, a discrete GPU, and [removed: an AMD Fusion Controller Hub chip] [added: a chipset] when needed), as we are able to optimize interoperability, provide our customers a single [added: point of contact for the]

[removed: point of contact for the] key platform components and enable them to bring the platforms to market quickly in a variety of PC and server system form factors.

[added: Notebooks and 2-in-1s.] We continue to invest in designing and developing high performing and low power APUs for notebook PC platforms for the consumer [removed: market.][added: and commercial markets.]

In January 2019, we announced our mobility line-up encompassing all notebook segments: second generation AMD [removed: Ryzen] [added: Ryzen™] 3000 Series Mobile Processors, powering [removed: ultrathin] [added: ultrathin, commercial] and gaming notebooks; AMD [removed: Athlon] [added: Athlon™] 300 Series Mobile Processors, powering mainstream notebooks with the “Zen” core; and optimized seventh generation A-Series processors, elevating performance for mainstream [removed: Chromebooks.][added: Chromebooks™ notebook computers.]

[removed: We] [added: In addition, we also] offer [removed: a full suite of chipset products,] the [removed: X470, the] B450 and the A320 [removed: chipset,] [added: chipset] that are combined with AMD Ryzen processors for the AM4 desktop [removed: platform.][added: platform for the performance and affordable mainstream platforms segments.]

We also have the [removed: X300 and] A300 chipsets designed for small form factors.

We also continue to offer AMD 9-Series chipsets for the Socket AM3/3+ platforms serving desktop PCs, and AMD A-Series [removed: Control] [added: Controller] Hubs [removed: for the Socket FM2/2+ platforms.]

[added: Commercial.] We offer enterprise-class desktop and notebook PC solutions sold as AMD PRO Mobile and AMD PRO desktop processors with [removed: Radeon] [added: Radeon™] Vega Graphics for the commercial client market.

These solutions are designed to provide [added: enterprise customers with the performance, security and business features such as] commercial-grade quality, platform longevity and extended image [removed: stability, and also include security and manageability features for enterprise customers.][added: stability they require.]

[removed: Graphics Market][added: Graphics Market]

In addition to traditional graphics markets, there is a large and growing market for [added: accelerated computing, powered by] graphics [removed: compute] [added: processors,] which is primarily made up of [removed: high performance compute] [added: high-performance computing] and machine learning/deep learning.

Traditional high performance [removed: compute] [added: computing] focuses on scientific research, model simulation, and exploration which is mainly driven by [removed: university] [added: a need for computing throughput in universities] and government research [removed: needs for high precision graphics compute workloads.][added: centers.]

[removed: Our] [added: Our] Graphics [removed: Products][added: Products]

Graphics processing is a fundamental component of almost everything we create and can be found in an APU, [removed: CPU,] [added: GPU,] SoC or a combination of a discrete GPU with one of the other foregoing products working in tandem.

Our customers generally use our graphics solutions to [added: enable or] increase the speed of rendering images, to help improve image resolution and color definition, and increasingly to process massive data sets for cloud and [removed: datacenter] [added: data center] applications.

We develop our graphics products for use in various computing devices and entertainment platforms, including desktop PCs, notebook PCs, 2-in-1s, All-in-Ones (AIOs), professional workstations, and the [removed: datacenter.][added: data center.]

Microsoft, Windows, DirectX, Xbox 360 and Xbox One are either registered trademarks or trademarks of Microsoft Corporation in the United States and/or other countries.

PCIe is a registered trademark of PCI-SIG Corporation.

Linux is the registered trademark of Linus Torvalds in the United States and other countries.

Arm is a registered trademark of ARM Limited (or its subsidiaries) in the US and/or elsewhere.

Computing and Graphics

Computing and Graphics Markets

Our Computing and Graphics Products

Desktop. In May 2019, we introduced the 3rd Gen AMD Ryzen™ desktop processor family based on the new “Zen 2” core architecture with AMD chiplet design approach.

Following that introduction, we announced in November 2019 the global availability of the flagship product in our AM4 mainstream platform infrastructure, the AMD Ryzen™ 9 3950X.

This product enables a high core count with 16 cores and 32 threads designed for PC buyers.

At the value end of the mainstream AM4 platform portfolio, we also announced the new AMD Athlon™ 3000G processor offering better performance and value for end users building budget oriented desktop platforms.

In addition to the mainstream product family, we introduced the next generation of the Ryzen™ Threadripper™ product line built on the new TRX40 platform to serve the needs of the high-end desktop segment for creators and enthusiasts.

Our November 2019 introduction included the 24-core AMD Ryzen™ Threadripper™ 3960X and the 32-core AMD Ryzen™ Threadripper™ 3970X processors.

In January 2020, we announced a processor for creative professionals, the 64-core, 128-thread AMD Ryzen™ Threadripper™ 3990X built to enable extreme performance for 3D, visual effects, and video professionals.

In January 2020, we announced our x86 8-core ultrathin laptop processors, the AMD Ryzen™ 4000 U-Series, as part of the AMD Ryzen™ 4000 Series Mobile Processor family, built on “Zen 2” core architecture with 7nm process technology and high performance Radeon™ graphics in an SOC design.

In addition, as part of the AMD Ryzen 4000 Series Mobile Processor family, we announced the Ryzen™ 4000 H-Series Mobile Processors for gaming and content creation.

These processors support AMD SmartShift technology, which allows for automatic power shifting with AMD Radeon discrete mobile GPUs to enable new levels of performance in thin notebooks.

We also announced the AMD Athlon™ 3000 Series Mobile Processor family powered by “Zen” architecture for mainstream notebook users.

In April 2019, we announced the 2nd Gen AMD Ryzen™ PRO mobile processors with Radeon Vega Graphics and the AMD Athlon™ PRO mobile processors with Radeon Vega Graphics.

These processors provide power-efficient performance, security features and commercial-grade reliability and manageability.

In September 2019, we expanded our commercial desktop lineup with the global availability of our new AMD Ryzen™ PRO 3000 Series desktop processors: AMD Ryzen™ 9 PRO 3900, AMD Ryzen™ 7 PRO 3700, and AMD Ryzen™ 5 PRO 3600.

The processors offer up to 12 cores and 24 threads and bring the computing performance of “Zen 2” and high core count to the commercial segment.

Chipsets. We offer a full suite of chipset products, including the new X570 chipset introduced in July 2019 which supports PCIe® 4.0 (fourth generation Peripheral Component Interconnect Express motherboard interface) designed for enthusiast desktop platforms.

In the High-End Desktop (HEDT) segment, we introduced the new TRX40 chipset to support the 3rd generation Ryzen Threadripper platform which offers high speed I/O and platform bandwidth.

For the 1st and 2nd generation Threadripper families, we continue to offer the X399 chipset.

for the Socket FM2/2+ platforms.

In May 2019, we announced the RDNA gaming architecture which is designed to deliver better performance, power and memory efficiency.

In July 2019, we announced the availability of the 7nm AMD Radeon™ RX 5700-series gaming graphics card family (AMD Radeon™ RX 5700 XT and RX 5700) featuring AMD RDNA architecture, high-speed GDDR6 (Graphics Double Data Rate type 6) memory and support for the PCIe 4.0 interface.

In October 2019, we announced the AMD Radeon™ RX 5500 series that includes the Radeon RX 5500 graphics card that will be available in desktop PCs from manufacturers and graphics cards from board partners as well as the Radeon™ 5500M GPU for notebook PCs.

In December 2019, we announced AMD

Radeon™ RX 5500 XT graphics card that is optimized to deliver high performance.

In January 2020, we introduced AMD Radeon™ RX 5600 series graphics products, which includes the AMD Radeon™ RX 5600 XT graphics card and the AMD Radeon RX 5600 graphics card, with AMD RDNA architecture and software feature to provide high-performance and high-fidelity experiences for 1080p gamers.

In June 2019, we announced the AMD Radeon™ Pro Vega II GPUs which utilizes 7nm AMD Radeon™ Vega family GPUs, HBM2 and AMD Infinity Fabric Link GPU interconnect technology designed to power demanding professional applications.

In November 2019, we announced the AMD Radeon™ Pro W5700, a 7nm professional PC workstation graphics card that enables 3D designers, architects and engineers to visualize, review and interact with their designs in real time to accelerate decision-making processes and product development cycles.

In March 2019, Google announced its new Stadia™ cloud gaming service using high-performance, custom AMD Radeon data center GPUs.

In May 2019, the US Department of Energy announced the Frontier exascale A+A (AMD CPUs plus AMD GPUs) system with Oakridge National Labs (ORNL).

In August 2019, Microsoft announced its new NVv4-series cloud offering of Azure Virtual Machines based on Radeon Instinct™ MI25 GPUs.

And in November 2019, we released ROCm 3.0, marking a major milestone in the path to Exascale class systems and platforms.

AMD has used this type of collaborative co-

In August 2019, we introduced the 2nd Gen AMD EPYC family of processors that feature up to 64 “Zen 2” cores in 7nm process technology for performance and are designed to reduce total cost of ownership (TOC) by up to 50%.

Material factors that could cause actual results to differ materially from current expectations include, without limitation, the following: Intel Corporation’s dominance of the microprocessor market and its aggressive business practices may limit AMD’s ability to compete effectively; AMD has a wafer supply agreement with GF with obligations to purchase all of its microprocessor and APU product requirements, and a certain portion of its GPU product requirements, manufactured at process nodes larger than 7 nanometer (nm) from GF with limited exceptions.

If GF is not able to satisfy AMD’s manufacturing requirements, AMD’s business could be adversely impacted; AMD relies on third parties to manufacture its products, and if they are unable to do so on a timely basis in sufficient quantities and using competitive technologies, AMD’s business could be materially adversely affected; failure to achieve expected manufacturing yields for AMD’s products could negatively impact its financial results; the success of AMD’s business is dependent upon its ability to introduce products on a timely basis with features and performance levels that provide value to its customers while supporting and coinciding with significant industry transitions; if AMD cannot generate sufficient revenue and operating cash flow or obtain external financing, it may face a cash shortfall and be unable to make all of its planned investments in research and development or other strategic investments; the loss of a significant customer may have a material adverse effect on AMD; AMD’s receipt of revenue from its semi-custom SoC products is dependent upon its technology being designed into third-party products and the success of those products; global economic and market uncertainty may adversely impact AMD’s business and operating results; AMD’s products may be subject to security vulnerabilities that could have a material adverse effect on AMD; IT outages, data loss, data breaches and cyber-attacks could compromise AMD’s intellectual property or other sensitive information, be costly to remediate and cause significant damage to its business, reputation and operations; AMD’s operating results are subject to quarterly and seasonal sales patterns; AMD may not be able to generate sufficient cash to service its debt obligations or meet its working capital requirements; AMD has a large amount of indebtedness which could adversely affect its financial position and prevent it from implementing its strategy or fulfilling its contractual obligations; the agreements governing AMD’s notes and the Secured Revolving Line of Credit impose restrictions on AMD that may adversely affect AMD’s ability

to operate its business; the markets in which AMD’s products are sold are highly competitive; AMD’s worldwide operations are subject to political, legal and economic risks and natural disasters, which could have a material adverse effect on it; AMD’s issuance to West Coast Hitech L.P. (WCH) of warrants to purchase 75 million shares of its common stock, if and when exercised, will dilute the ownership interests of AMD’s existing stockholders, and the conversion of the 2.125% Convertible Senior Notes due 2026 (2.125% Notes) may dilute the ownership interest of AMD’s existing stockholders, or may otherwise depress the price of its common stock; uncertainties involving the ordering and shipment of AMD’s products could materially adversely affect it; the demand for AMD’s products depends in part on the market conditions in the industries into which they are sold.

Fluctuations in demand for AMD’s products or a market decline in any of these industries could have a material adverse effect on its results of operations; AMD’s ability to design and introduce new products in a timely manner is dependent upon third-party intellectual property; AMD depends on third-party companies for the design, manufacture and supply of motherboards, software and other computer platform components to support its business; if AMD loses Microsoft Corporation’s support for its products or other software vendors do not design and develop software to run on AMD’s products, its ability to sell its products could be materially adversely affected; AMD’s reliance on third-party distributors and add-in-board (AIB) partners subjects it to certain risks; AMD may incur future impairments of goodwill and technology license purchases; AMD’s inability to continue to attract and retain qualified personnel may hinder its business; in the event of a change of control, AMD may not be able to repurchase its outstanding debt as required by the applicable indentures and its Secured Revolving Line of Credit, which would result in a default under the indentures and its Secured Revolving Line of Credit; the semiconductor industry is highly cyclical and has experienced severe downturns that have materially adversely affected, and may continue to materially adversely affect its business in the future; acquisitions, divestitures and/or joint ventures could disrupt its business, harm its financial condition and operating results or dilute, or adversely affect the price of, its common stock; AMD’s business is dependent upon the proper functioning of its internal business processes and information systems and modification or interruption of such systems may disrupt its business, processes and internal controls; if essential equipment, materials or manufacturing processes are not available to manufacture its products, AMD could be materially adversely affected; if AMD’s products are not compatible with some or all industry-standard software and hardware, it could be materially adversely affected; costs related to defective products could have a material adverse effect on AMD; if AMD fails to maintain the efficiency of its supply chain as it responds to changes in customer demand for its products, its business could be materially adversely affected; AMD outsources to third parties certain supply-chain logistics functions, including portions of its product distribution, transportation management and information technology support services; AMD’s stock price is subject to volatility; worldwide political conditions may adversely affect demand for AMD’s products; unfavorable currency exchange rate fluctuations could adversely affect AMD; AMD’s inability to effectively control the sales of its products on the gray market could have a material adverse effect on it; if AMD cannot adequately protect its technology or other intellectual property in the United States and abroad, through patents, copyrights, trade secrets, trademarks and other measures, it may lose a competitive advantage and incur significant expenses; AMD is a party to litigation and may become a party to other claims or litigation that could cause it to incur substantial costs or pay substantial damages or prohibit it from selling its products; AMD’s business is subject to potential tax liabilities; and AMD is subject to environmental laws, conflict minerals-related provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act as well as a variety of other laws or regulations that could result in additional costs and liabilities.

The years ended December 29, 2018, December 30, 2017 and December 31, 2016 included 52 weeks, 52 weeks and 53 weeks, respectively.

Graphics Processing Unit (GPU).

Accelerated Processing Unit (APU).

Chipset.

Our x86 Microprocessor and Chipset Products

Desktop.

In February 2018, we introduced two AMD Ryzen™ desktop processors with built-in Radeon™ Vega graphics models.

AMD Ryzen 5 2400G and AMD Ryzen 3 2200G processors combine four of the latest “Zen” CPU cores with advanced Radeon “Vega” architecture on a single chip.

In April 2018, we announced the global availability of our second generation Ryzen desktop processors which include four models: Ryzen 7 2700X, Ryzen 7 2700, Ryzen 5 2600X, and Ryzen 5 2600 processors that are optimized for gamers, creators, and hardware enthusiasts.

These four models use 12nm process technology to offer high gaming performance and multiprocessing performance.

In August 2018, we announced the availability of our second generation AMD Ryzen™ Threadripper™ 2990WX processor with 32 cores and 64 threads and the Ryzen Threadripper 2950X with 16 cores and 32 threads.

In September 2018, we launched a reimagined family of AMD Athlon™ desktop processors with Radeon™ Vega graphics: AMD Athlon 200GE, Athlon 220GE, and Athlon 240GE.

These desktop processors combine our x86 “Zen” core and “Vega” graphics architectures on an SOC design.

They are designed to offer responsive and reliable computing for web-browsing and video streaming.

In October 2018, we launched two additional second generation AMD Ryzen Threadripper processor models, the Ryzen 2970WX with 24 cores and 48 threads and the Ryzen Threadripper 2920X with 12 cores and 24 threads.

The Ryzen Threadripper WX series focuses on computational power for heavy workloads and the Ryzen Threadripper X series provides enthusiasts, gamers and streamers high performance and a smooth gaming experience.

Notebooks and 2-in-1s.

In 2018, we introduced the Ryzen 7 2700U Mobile processor with Radeon RX Vega 10 Graphics, the Ryzen 5 2500U Mobile Processor with Radeon Vega 8 Graphics, the Ryzen 3 2300U Mobile Processor with Radeon Vega 6 Graphics, and the Ryzen 3 2200U Mobile Processor with Radeon Vega 3 Graphics.

In addition to the Ryzen™ Mobile family, we also continue to offer AMD A-Series APUs based on previous generation CPU and graphics architectures, primarily targeting the value and mainstream segments.

Chipsets.

The X470 chipset is designed for enthusiast desktop platforms while the B450 is targeted for the performance segment and the A320 is focused on affordable mainstream platforms.

We offer the X399 chipset, which pairs with our Ryzen Threadripper product line for High-End Desktops (HEDT) using the all-new socket TR4 platform.

Commercial.

In May 2018, we announced the availability of our commercial-grade Ryzen™ PRO mobile processors with Radeon Vega graphics for high performance and energy efficient notebook platforms, including the Ryzen 7 PRO Mobile 2700U with Radeon Vega 10 Graphics, Ryzen 5 PRO Mobile 2500U with Radeon Vega 8 Graphics, and Ryzen 3 PRO Mobile 2300U with Radeon Vega 6 Graphics.

In September 2018, we announced the availability of our commercial-grade Athlon™ PRO 200GE desktop processor, along with three 2nd generation Ryzen™ PRO desktop processor

models for commercial, enterprise and the public sector: the Ryzen 7 PRO 2700X, Ryzen 7 PRO 2700, and Ryzen™ 5 PRO 2600 processors.

Currently, the most well-known use case of blockchain is cryptocurrency; however, the number of applications and the potential impact of blockchain technology goes much further.

In June 2018, we introduced the Radeon™ RX Vega56 Nano Edition bringing Vega graphics to small form factor PCs.

In October 2018, we introduced new AMD Radeon Vega Mobile graphics processors for next generation notebooks powered by the AMD “Vega” architecture for cool and quiet operation.

In November 2018, we introduced the Radeon RX 590 graphics card built upon 12 nm process technology.

The Radeon RX 590 pairs with the advanced AMD Radeon FreeSync gaming display technology to deliver an exceptional gaming experience.

In December 2018, we announced AMD Radeon™ Software Adrenalin 2019 Edition, the next generation of our software suite for AMD Radeon GPUs that provides gamers, creators and enthusiasts with new

immersive features for visual experiences.

It provides high performance and enables streaming of PC-based games and video to mobile devices as well as to standalone VR headsets.

It is built on 7nm process technology and has 16GB of HBM2 memory and 1 TB/s memory bandwidth.

Professional Graphics.

[removed: Shareholder] [added: Shareholder] Derivative [removed: Lawsuits (Wessels,] [added: Lawsuits (Wessels,] Hamilton and [removed: Ha)][added: Ha)]

On March 20, 2014, a purported shareholder derivative lawsuit captioned [removed: Wessels] [added: *Wessels] v.

Read, et [removed: al.,] [added: al.*,] Case No. 1:14 cv-262486 (Wessels) was filed against us (as a nominal defendant only) and certain of our directors and officers in the Santa Clara County Superior Court of the State of California.

On April 27, 2015, a similar purported shareholder derivative lawsuit captioned [removed: Christopher] [added: *Christopher] Hamilton and David Hamilton v.

Barnes, et [removed: al.,] [added: al.*,] Case No. 5:15-cv-01890 (Hamilton) was filed against us (as a nominal defendant only) and certain of our directors and officers in the United States District Court for the Northern District of California.

On September 29, 2015, a similar purported shareholder derivative lawsuit captioned [removed: Jake] [added: *Jake] Ha v Caldwell, et [removed: al.,] [added: al.,*] Case No. 3:15-cv-04485 (Ha) was filed against us (as a nominal defendant only) and certain of our directors and officers in the United States District Court for the Northern District of California.

The Wessels, Hamilton and Ha shareholder derivative lawsuits were stayed pending resolution of a class action lawsuit captioned [removed: Hatamian] [added: *Hatamian] v.

AMD, et [removed: al.,] [added: al.*,] C.A. No. 3:14-cv-00226 filed against us in the United States District Court for the Northern District of California (the Hatamian Lawsuit).

We opposed this motion on December 13, 2018, and [added: the Court denied] it [removed: remains pending.][added: on February 25, 2019.]

Based upon information presently known to management, we believe that the [removed: potential liability, if any,] [added: settlement] will not have a material adverse effect on our financial condition, cash flows or results of operations.

[removed: AMD, et al., Case] [added: AMD*,] No. [removed: 3:18-cv-00321] [added: 15-cv-04922] was filed against us in the United States District Court for the Northern District of California.

[removed: Hauck] [added: Hauck] et al.

[removed: Litigation][added: Litigation]

Since January 19, 2018, three putative class action complaints have been filed against us in the United States District Court for the Northern District of California: (1) [removed: Diana] [added: *Diana] Hauck et al.

AMD, [removed: Inc.,] [added: Inc.,*] Case No. 5:18-cv-0047, filed on January 19, 2018; (2) [removed: Brian] [added: *Brian] Speck et al.

AMD, [removed: Inc.,] [added: Inc.*,] Case No. 5:18-cv-0744, filed on February 4, 2018; and (3) [removed: Nathan] [added: *Nathan] Barnes and Jonathan Caskey-Medina, et al.

AMD, [removed: Inc.,] [added: Inc.*,] Case No. 5:18-cv-00883, filed on February 9, 2018.

[removed: On April 9, 2018, the court consolidated] these cases and ordered that [removed: Diana] [added: *Diana] Hauck et al.

AMD, [removed: Inc.] [added: Inc.*] serve as the lead case.

[removed: Quarterhill] [added: Quarterhill] Inc. [removed: Litigation][added: Litigation]

On November 16, 2018, AMD filed answers in the [removed: Collabo] [added: *Collabo*] and [removed: Aquila] [added: *Aquila*] cases and filed a motion to dismiss in the [removed: Polaris] [added: *Polaris*] case.

On January 25, 2019, we filed amended answers and counterclaims in the [removed: Collabo] [added: *Collabo*] and [removed: Aquila] [added: *Aquila*] cases.

[removed: Dickey Litigation][added: Dickey Litigation]

On October 26, 2015, a putative class action complaint captioned [removed: Dickey] [added: *Dickey] et al.

The class definition does not encompass our [removed: RyzenTM] [added: Ryzen] or [removed: EPYCTM] [added: EPYC] processors.

[removed: Environmental Matters][added: Environmental Matters]

[removed: Other Matters][added: Other Matters]

The Wessels, Hamilton, and Ha appeals are currently pending.

Briefing has completed in each appeal.

On April 9, 2018, the court consolidated

On April 4, 2019, the court granted our motion and dismissed all claims currently at issue with prejudice.

On May 6, 2019, the court granted the parties’ stipulation and request under Fed.

R.

Civ.

P.

54(b) to enter a partial final judgment and certify for appeal the court’s April 4, 2019 dismissal order, and on that same date, the plaintiffs voluntarily dismissed without prejudice their remaining claims pursuant to an agreement whereby, subject to certain terms and conditions, we agreed to toll the statute of limitations and/or statute of repose.

On May 30, 2019, the plaintiffs filed a Notice of Appeal with the U.S. Court of Appeals for the Ninth Circuit.

Briefing has completed for the appeal.

On July 22, 2019, our motion to dismiss in the Polaris case was denied.

On August 23, 2019, the Court held a claim construction hearing in each case.

On May 9, 2019, the parties attended mediation and reached a tentative settlement.

On June 3, 2019, the Ninth Circuit Court of Appeals denied our petition seeking appellate review of the January 17, 2019, class certification order.

On August 9, 2019, the parties executed a formal settlement agreement.

On August 23, 2019, plaintiffs filed their motion for preliminary approval of the settlement agreement.

On October 4, 2019, the Court granted the motion for preliminary approval of the settlement agreement.

Monterey Research Litigation

On November 15, 2019, Monterey Research, LLC filed a patent infringement complaint against us in the United States District Court for the District of Delaware.

Monterey Research alleges that we infringe six U.S. patents: 6,534,805 (related to SRAM cell design); 6,629,226 (related to read interface protocols); 6,651,134 (related to memory devices); 6,765,407 (related to programmable digital circuits); 6,961,807 (related to integrated circuits and associated memory systems); and 8,373,455 (related to output buffer circuits).

Monterey Research seeks unspecified monetary damages, enhanced damages, interest, fees, expenses, costs, and injunctive relief against us.

On January 22, 2020, we filed a motion to dismiss part of Monterey Research’s complaint.

The Wessels, Hamilton, and Ha appeals are currently pending; the plaintiffs have not yet filed their opening briefs in any of the three matters.

Kim Securities Litigation

On January 16, 2018, a putative class action lawsuit captioned Kim et al.

v.

The complaint purports to assert claims against us and certain individual officers for alleged violations of Sections 10(b) and 20(a) of the Exchange Act, and Rule 10b-5 of the Exchange Act.

The plaintiff seeks to represent a proposed class of all persons who purchased or otherwise acquired our common stock during the period February 21, 2017 through January 11, 2018.

The complaint seeks damages allegedly caused by alleged materially misleading statements and/or material omissions by us and the individual officers regarding a security vulnerability (Spectre), which statements and omissions, the plaintiff claims, allegedly caused our common stock price to be artificially inflated during the purported class period.

The complaint seeks unspecified compensatory damages, attorneys’ fees and costs.

On August 3, 2018, plaintiffs filed an amended complaint with similar allegations and shortening the class period to June 29, 2017 through January 11, 2018.

We filed a motion to dismiss plaintiffs’ claims on September 25, 2018, and plaintiffs filed an opposition to our motion to dismiss on November 14, 2018.

Zeng Shareholder Derivative Lawsuit

On March 8, 2018, a purported shareholder derivative lawsuit captioned Zeng v.

Su, et al., Case No. 18CIV01192 was filed against us (as a nominal defendant only) and certain of our directors and officers in the San Mateo County Superior Court of the State of California.

The complaint purports to assert claims against us and certain individual directors and officers for breach of

fiduciary duty, unjust enrichment, abuse of control, gross mismanagement and waste of corporate assets.

The complaint seeks damages allegedly caused by alleged materially misleading statements and/or material omissions by us and the individual directors and officers regarding Spectre, which statements and omissions, the plaintiffs claim, allegedly operated to artificially inflate the price paid for our common stock during the period.

On April 26, 2018, the lawsuit was transferred to Santa Clara County and assigned a new case number, 18CV327692.

On August 14, 2018, the Court stayed this lawsuit pending a decision on the motion to dismiss in Kim et al.

AMD, et al., Case No. 3:18-cv-00321 filed against us in the United States District Court for the Northern District of California.

In re Advanced Micro Devices, Inc. Shareholder Derivative Litigation

Two purported shareholder derivative lawsuits were filed against us (as a nominal defendant only) and certain of our directors and officers in the United States District Court, Northern District of California: (1) Jacqueline Dolby, derivatively on behalf of AMD, Inc. v.

Su et al., Case No. 5:18-cv-03575, filed on June 14, 2018; and (2) Gusinsky Trust, derivatively on behalf of AMD, Inc. v.

Su et al., Case No. 5:18-cv-03811, filed on June 26, 2018.

The complaints purport to assert claims against us and certain individual directors and officers for violation of Section 14(a) of the Exchange Act and SEC Rule 14a-9, breach of fiduciary duty, waste of corporate assets, and unjust enrichment.

The complaints seek damages purportedly caused by alleged materially misleading statements and/or material omissions by us and the individual directors and officers regarding Spectre.

The plaintiffs allege that these statements and omissions operated to artificially inflate the price paid for our common stock during the period.

On July 12, 2018, the court consolidated the Dolby and Gusinsky Trust shareholder derivative lawsuits under the caption In re Advanced Micro Devices, Inc. Shareholder Derivative Litigation.

On August 10, 2018, the Court stayed this lawsuit pending a decision on the motion to dismiss in Kim et al.

AMD, No. 15-cv-04922 was filed against us in the United States District Court for the Northern District of California.

[removed: UNITED STATES][added: UNITED STATES]

[removed: SECURITIES] [added: SECURITIES] AND EXCHANGE [removed: COMMISSION][added: COMMISSION]

[removed: Washington,] [added: Washington,] D.C. [removed: 20549][added: 20549]

[removed: FORM 10-K][added: FORM 10-K]

[removed: (Mark One)][added: (Mark One)]

| [removed: ý] [added: ☒] | [removed: ANNUAL] [added: ANNUAL] REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF [removed: 1934.] [added: 1934.] |

[removed: | | For the fiscal year ended December 29, 2018 |][added: For The Fiscal Year Ended December 28, 2019]

| [removed: ¨] [added: ☐] | [removed: TRANSITION] [added: TRANSITION] REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF [removed: 1934.] [added: 1934.] |

| | [removed: For] [added: For] the transition period [removed: from to] [added: from to] |

[removed: Commission] [added: Commission] File [removed: Number 001-07882][added: Number 001-07882]

[removed: ADVANCED] [added: ADVANCED] MICRO DEVICES, [removed: INC.][added: INC.]

[removed: (Exact] [added: (Exact] name of registrant as specified in its [removed: charter)][added: charter)]

| [removed: Delaware] [added: Delaware] | [removed: 94-1692300] [added: 94-1692300] |

| [removed: (State] [added: (State] or other jurisdiction [removed: of incorporation] [added: of incorporation] or [removed: organization)] [added: organization)] | [removed: (I.R.S. Employer Identification No.)] [added: (I.R.S. Employer Identification No.)] |

| [removed: 2485] [added: 2485] Augustine [removed: Drive, Santa Clara, California] [added: Drive] | [removed: 95054] |

| [removed: (Address] [added: (Address] of principal executive [removed: offices)] [added: offices)] | [removed: (Zip Code)] [added: (Zip Code)] |

[removed: (408) 749-4000][added: (408) 749-4000]

[removed: (Registrant’s] [added: (Registrant’s] telephone number, including area [removed: code)][added: code)]

[removed: Securities] [added: Securities] registered pursuant to Section 12(b) of the [removed: Act:][added: Act:]

| [removed: (Title] [added: (Title] of each [removed: class)] [added: class)] | [removed: (Name] [added: (Trading symbol) | (Name] of each exchange on which [removed: registered)] [added: registered)] |

| Common [removed: Stock] [added: Stock,] $0.01 par value per share | [added: AMD |] The NASDAQ Global Select Market |

[removed: Securities] [added: Securities] registered pursuant to Section 12(g) of the [removed: Act:][added: Act:]

[removed: None][added: None]

Yes [removed: ¨] [added: ☐] No ý

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated [removed: filer or] [added: filer,] a smaller reporting [added: company, or an emerging growth] company.

See definition of “large accelerated filer,” “accelerated [removed: filer” and] [added: filer,”] “smaller reporting [added: company,” and “emerging growth] company” in Rule 12b-2 of the Exchange Act (check one):

| Non-accelerated filer | ¨ | Smaller reporting company | [removed: ¨] [added: ☐] |

As of June [removed: 30, 2018,] [added: 29, 2019,] the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was approximately [removed: $14.5] [added: $32.8] billion based on the reported closing sale price of [removed: $14.99] [added: $30.37] per share as reported on The NASDAQ Global Select Market (NASDAQ) on June [removed: 29, 2018,] [added: 28, 2019,] which was the last business day of the registrant’s most recently completed second fiscal quarter.

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date: [removed: 1,005,298,882] [added: 1,169,661,536] shares of common stock, $0.01 par value per share, as of [removed: February 1, 2019.][added: January 31, 2020.]

[removed: DOCUMENTS] [added: DOCUMENTS] INCORPORATED BY [removed: REFERENCE][added: REFERENCE]

Portions of the registrant’s proxy statement for the [removed: 2019] [added: 2020] Annual Meeting of Stockholders [removed: (2019] [added: (2020] Proxy Statement) are incorporated into Part III hereof.

The [removed: 2019] [added: 2020] Proxy Statement will be filed with the U.S. Securities and Exchange Commission within 120 days after the registrant’s fiscal year ended December [removed: 29, 2018.][added: 28, 2019.]

[removed: For The Fiscal Year Ended December 29, 2018][added: | | For the fiscal year ended |]

[removed: INDEX][added: INDEX]

[removed: | [PART I](#sDA189775E5A8A28F2984FAE4F89C5AB5) | | [1](#sDA189775E5A8A28F2984FAE4F89C5AB5) |][added: PART I]

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| | December 28, 2019 |

| | OR |

| Santa Clara, | |

| California | 95054 |

| Emerging growth company | ☐ | | |

Advanced Micro Devices, Inc.

FORM 10-K

| [PART II](#sF768D8297E91E5A6163038EBF1858BC8) | | [31](#sF768D8297E91E5A6163038EBF1858BC8) |

| [PART IV](#s7791B5908362ABF3C06238EBFE8B2319) | | [84](#s7791B5908362ABF3C06238EBFE8B2319) |

| [SIGNATURES](#s625FEE3FC83E2ECAE2E638EBC212330A). | | [90](#s625FEE3FC83E2ECAE2E638EBC212330A) |

10-K 1 amd-12292018x10k.htm 10-K

| | |

| --- | --- |

| | OR |

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

| [PART II](#s07FD3DD2B2AC6070A72CFAE4FA198B6B) | | [33](#s07FD3DD2B2AC6070A72CFAE4FA198B6B) |

| [PART IV](#sF62557838CB1264C18C5FAE517BA5E6F) | | [95](#sF62557838CB1264C18C5FAE517BA5E6F) |

| [SIGNATURES](#sEDCE8BA94B26B3DC272BFAE4A9884082). | | [104](#sEDCE8BA94B26B3DC272BFAE4A9884082) |

As of December [removed: 29, 2018,] [added: 28, 2019,] we leased approximately [removed: 2.47] [added: 2.35] million square feet of space for research and development, engineering, administrative and warehouse use, including our headquarters in Santa Clara, California, our principal administrative facilities in Austin, Texas, our [added: design center in Shanghai, China, our] main facility with respect to graphics and chipset products located in Markham, Ontario, Canada and a number of smaller regional sales offices located in commercial centers near customers, [removed: principally in the United States, Latin America, Europe and Asia.]

We occupy 220,000 square feet of space in our headquarters in Santa Clara, California under a 10-year operating lease which commenced in August [removed: 2017.][added: 2017 and expires in July 2027.]

We currently do not anticipate difficulty in either retaining occupancy of any of our facilities through lease renewals prior to expiration or through month-to-month [removed: occupancy,] [added: occupancy] or replacing them with equivalent facilities.

We believe that our existing facilities are suitable and adequate for our present [removed: purposes,] [added: purposes] and [removed: that,] [added: that] the productive capacity of such facilities is substantially being utilized or we have plans to utilize such capacity.

principally in the United States, Europe, Asia and Latin America.

We occupy approximately 265,000 square feet of space in our design center in Shanghai, China under a 10-year operating lease, which expires in March 2028.

[removed: PART II][added: PART II]

On [removed: February 1, 2019,] [added: January 31, 2020,] there were [removed: 4,614] [added: 4,364] registered holders of our common stock, and the closing price of our common stock was [removed: $24.51] [added: $47.00] per share as reported on NASDAQ.

[removed: Performance Graph][added: Performance Graph]

[removed: Comparison] [added: Comparison] of Five-Year Cumulative Total [removed: Returns][added: Returns]

[removed: Advanced] [added: Advanced] Micro Devices, S&P 500 Index and S&P 500 Semiconductor [removed: Index][added: Index]

The following graph shows a five-year comparison of cumulative total return on our common stock, the S&P 500 Index and the S&P 500 Semiconductor Index from December [removed: 28, 2013] [added: 27, 2014] through December [removed: 29, 2018.][added: 28, 2019.]

[removed: ][added: ]

| | [removed: Base Period] [added: Base Period] | [removed: Years Ending] [added: Years Ending] | | | | | [added: | | | | |]

| [removed: Company] [added: Company] / [removed: Index] [added: Index] | [removed: 12/28/2013] [added: 12/27/2014] | [removed: 12/27/2014] [added: 12/26/2015] | [removed: 12/26/2015] | [removed: 12/31/2016] [added: 12/31/2016] | [removed: 12/30/2017] | [removed: 12/29/2018] [added: 12/30/2017] | [added: | 12/29/2018 | | 12/28/2019 | |]

[removed: Unregistered] [added: Unregistered] Sales of Equity [removed: Securities][added: Securities]

[removed: On December 26, 2018, we] [added: We] issued warrants [added: dated December 30, 2019] to purchase [removed: 127,435] [added: 40,162] shares of our common stock to a commercial partner pursuant to a strategic arrangement with such partner.

The warrants have an exercise price of [removed: $20.0423] [added: $25.4994] per share and expire on December [removed: 26, 2021.][added: 30, 2022.]

| | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | | | |

| Advanced Micro Devices, Inc. | 100 | 110.19 | | 427.92 | | 387.92 | | 672.45 | | 1,742.64 | |

| S&P 500 Index | 100 | 100.77 | | 111.92 | | 136.35 | | 129.26 | | 171.64 | |

| S&P 500 Semiconductors Index | 100 | 100.47 | | 126.23 | | 172.07 | | 160.39 | | 237.49 | |

| | | | | | | |

| --- | --- | --- | --- | --- | --- | --- |

| Advanced Micro Devices, Inc. | 100 | 70.11 | 77.25 | 300.00 | 271.96 | 471.43 |

| S&P 500 Index | 100 | 115.76 | 116.64 | 129.55 | 157.84 | 150.92 |

| S&P 500 Semiconductors Index | 100 | 139.35 | 140.00 | 175.90 | 239.79 | 224.48 |

During the fourth quarter of 2018, we settled $35 million in aggregate principal amount of our 7.00% Senior Notes due 2024 (7.00% Notes) with 1,789,751 treasury shares.

| | |

| --- | --- |

| | [removed: 2018(1)] [added: 2019(1)] | | | | [removed: 2017(1)(2)] [added: 2018(1)] | | | | [removed: 2016(1)(2)] [added: 2017(1)(2)] | | | | [removed: 2015(1)] [added: 2016(1)(2)] | | | | [removed: 2014(1)] [added: 2015(1)] | | |

| | [removed: In] [added: In] millions except per share [removed: amounts] [added: amounts] | | | | | | | | | | | | | | | | | | |

| Net revenue | $ | [removed: 6,475] [added: 6,731] | | | $ | [removed: 5,253] [added: 6,475] | | | $ | [removed: 4,319] [added: 5,253] | | | $ | [removed: 3,991] [added: 4,319] | | | $ | [removed: 5,506] [added: 3,991] | |

| Net income (loss) [removed: (3)(4)(5)(6)(7)] [added: (3)(4)] | [removed: 337] [added: $] | [added: 341] | | | [removed: (33] [added: $] | [added: 337] | [removed: )] | | [removed: (498] [added: $] | [added: (33] | ) | | [removed: (660] [added: $] | [added: (498] | ) | | [removed: (403] [added: $] | [added: (660] | ) |

| Basic | $ | [removed: 0.34] [added: 0.31] | | | $ | [removed: (0.03] [added: 0.34] | [removed: )] | | $ | [removed: (0.60] [added: (0.03] | ) | | $ | [removed: (0.84] [added: (0.60] | ) | | $ | [removed: (0.53] [added: (0.84] | ) |

| Diluted | $ | [removed: 0.32] [added: 0.30] | | | $ | [removed: (0.03] [added: 0.32] | [removed: )] | | $ | [removed: (0.60] [added: (0.03] | ) | | $ | [removed: (0.84] [added: (0.60] | ) | | $ | [removed: (0.53] [added: (0.84] | ) |

| Basic | [removed: 982] [added: 1,091] | | | | [removed: 952] [added: 982] | | | | [removed: 835] [added: 952] | | | | [removed: 783] [added: 835] | | | | [removed: 768] [added: 783] | | |

| Diluted | [removed: 1,064] [added: 1,120] | | | | [removed: 952] [added: 1,064] | | | | [removed: 835] [added: 952] | | | | [removed: 783] [added: 835] | | | | [removed: 768] [added: 783] | | |

| Long-term debt, net and other [removed: long term] [added: long-term] liabilities [removed: (8)(9)] [added: (5)] | $ | [removed: 1,306] [added: 643] | | | $ | [removed: 1,443] [added: 1,306] | | | $ | [removed: 1,559] [added: 1,443] | | | $ | [removed: 2,093] [added: 1,559] | | | $ | [removed: 2,110] [added: 2,093] | |

| Total assets [removed: (9)] | $ | [removed: 4,556] [added: 6,028] | | | $ | [removed: 3,552] [added: 4,556] | | | $ | [removed: 3,328] [added: 3,552] | | | $ | [removed: 3,084] [added: 3,328] | | | $ | [removed: 3,737] [added: 3,084] | |

| (1) | [added: | 2019,] 2018, 2017, [removed: 2015] and [removed: 2014] [added: 2015] each consisted of 52 weeks, whereas 2016 consisted of 53 weeks. |

| (2) | [added: |] 2017 and 2016 amounts adjusted to reflect the retrospective application of Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) 2014-09, [removed: Revenue] [added: *Revenue] from Contracts with [removed: Customers. Refer to Note 2 Summary of Significant Accounting Policies.] [added: Customers*.] |

| [removed: (6)] [added: (4)] | [added: |] In [removed: 2014,] [added: 2015,] we [removed: recorded a goodwill impairment charge] [added: implemented restructuring plans and incurred net charges] of [removed: $233 million related to our Computing] [added: $53 million, which primarily consisted of severance] and [removed: Graphics segment. Also in 2014,] [added: related employee benefits. In addition,] we [removed: recorded] [added: exited the dense server systems business, formerly Sea Micro, Inc., resulting in] a [removed: $58 million lower] [added: charge] of [removed: cost or market inventory adjustment related to our second generation APU products. In 2015,] [added: $76 million in restructuring and other special charges, net. Also,] we recorded an inventory write-down of $65 million, which was primarily the result of lower anticipated demand for older-generation APUs, and a technology node transition charge of $33 million. |

| [removed: (8)] [added: (5)] | [removed: Total] [added: | In 2019, we reduced our] long-term [removed: debt] [added: debt, net] and other long term liabilities [removed: decreased] by [removed: $534 million from 2015] [added: $663 million, primarily due] to [added: $628 million of net debt conversion and repayment. In] 2016, [added: we reduced our long-term debt, net and other long term liabilities by $534 million,] primarily due to $1,048 million of net debt repayment, partially offset by the issuance of $805 million in principal amount of 2.125% Notes net of unamortized discount of $308 million and unamortized [removed: financing] [added: issuance] cost of $14 [removed: million, and $38 million increase in other long-term liabilities mainly due to higher technology licenses payable.] [added: million.] |

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| --- | --- | --- |

| | | |

| | | |

| | | |

| (3) | | In 2016, we recorded a charge of $340 million in Cost of sales, consisting of the $240 million value of the warrant under a warrant agreement and the $100 million payment, which were both associated with the sixth amendment to the WSA. In addition, we recorded a cumulative pre-tax gain of $146 million on the sale of our 85% equity interest in the ATMP JV. |

| | | |

| | | |

| | |

| --- | --- |

| (3) | During the third quarter of 2016, we agreed to pay GF $100 million in installments related to the Sixth Amendment with GF starting in the fourth fiscal quarter of 2016 through the third quarter of 2017. As of December 30, 2017, we paid GF $100 million in aggregate. In addition, in 2016 we recorded a charge of $340 million in Cost of sales, consisting of the $100 million payment under the Sixth Amendment and the $240 million value of the warrant under the Warrant Agreement issued in consideration of the Sixth Amendment. |

| (4) | In 2015 and 2014, we implemented restructuring plans and incurred net charges of $53 million and $58 million in 2015 and 2014, respectively, which primarily consisted of severance and related employee benefits. |

| (5) | In 2015, we exited the dense server systems business, formerly SeaMicro resulting in a charge of $76 million in restructuring and other special charges, net. In 2014, we incurred other special charges of $13 million primarily related to the departure of a former CEO. |

| (7) | In 2016, we recorded a cumulative pre-tax gain on the sale of our 85% equity interest in ATMP JV of $146 million which was recognized in Other income (expense) on our consolidated statements of operations. |

| (9) | Amounts retrospectively reflected adoption of FASB ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs beginning in the first quarter of 2016. We reclassified debt issuance costs from long-term assets to long-term debt, net by $25 million and $30 million for 2015 and 2014, respectively, on our consolidated balance sheets. |

[removed: Advanced] [added: Advanced] Micro Devices, [removed: Inc.][added: Inc.]

[removed: Consolidated] [added: Consolidated] Statements of [removed: Operations (1)][added: Operations]

| | [removed: Year Ended] [added: Year Ended] | | | | | | | | | | |

| | [removed: December 29, 2018] [added: December 28, 2019] | | | | [removed: December 30, 2017] [added: December 29, 2018] | | | | [removed: December 31, 2016] [added: December 30, 2017] | | |

| | [removed: (In] [added: (In] millions, except per share [removed: amounts)] [added: amounts)] | | | | | | | | | | |

| Net revenue | $ | [removed: 6,475] [added: 6,731] | | | $ | [removed: 5,253] [added: 6,475] | | | $ | [removed: 4,319] [added: 5,253] | |

| Cost of sales | [removed: 4,028] [added: 3,863] | | | | [removed: 3,466] [added: 4,028] | | | | [removed: 3,316] [added: 3,466] | | |

| Gross [removed: margin] [added: profit] | [removed: 2,447] [added: 2,868] | | | | [removed: 1,787] [added: 2,447] | | | | [removed: 1,003] [added: 1,787] | | |

| Research and development | [removed: 1,434] [added: 1,547] | | | | [removed: 1,196] [added: 1,434] | | | | [removed: 1,008] [added: 1,196] | | |

| Marketing, general and administrative | [removed: 562] [added: 750] | | | | [removed: 516] [added: 562] | | | | [removed: 466] [added: 516] | | |

| Licensing gain | [removed: —] [added: (60] | | [added: )] | | [removed: (52] [added: —] | | [removed: )] | | [removed: (88] [added: (52] | | ) |

| Operating income [removed: (loss)] | [removed: 451] [added: 631] | | | | [removed: 127] [added: 451] | | | | [removed: (373] [added: 127] | | [removed: )] |

| Interest expense | [removed: (121] [added: (94] | | ) | | [removed: (126] [added: (121] | | ) | | [removed: (156] [added: (126] | | ) |