| The semiconductor market, particularly the high-performance semiconductor
market, is highly competitive and subject to rapid technological change, price
erosion and heightened international competition. The telecommunications, data communications, ATE and high-speed computing industries are also becoming intensely competitive due in part to deregulation and heightened international competition. The ability of the Company to compete successfully in its markets depends on a number of factors, including product performance, success in designing and subcontracting the manufacture of new products that implement new technologies, product quality, reliability, price, the efficiency of production, design wins for its IC products, ramp up of production of the Company's products for particular system manufacturers, end-user acceptance of the system manufacturers' products, market acceptance of competitors' products and general economic conditions. In addition, the Company's competitors may offer enhancements to existing products, or offer new products based on new technologies, industry standards or customer requirements, that are available to customers on a more timely basis than comparable products from the Company or that have the potential to replace or provide lower cost alternatives to the
Company's products. The introduction of such enhancements or new products by the Company's competitors could render the Company's existing and future products obsolete or unmarketable. Furthermore, once a customer has designed a supplier's product into its system, the customer is extremely reluctant to change its supply source due to the significant costs associated with qualifying a new supplier. Finally, the Company expects that certain of its
competitors and other semiconductor companies may seek to develop and introduce products that integrate the functions performed by the Company's IC products on a single chip, thus eliminating the need for the Company's products. Each of these factors could have a material adverse effect on the Company's business, financial condition and results of operations. In the telecommunications and data communications markets, the Company competes primarily against GaAs-based companies such as Giga, TriQuint and
Vitesse, and bipolar silicon-based products from companies such as Hewlett-
Packard, Maxim and Sony. In certain circumstances, most notably with respect to ASICs supplied to Northern Telecom, AMCC's customers or potential customers have internal IC manufacturing capability, and this internal source is an alternative available to the customer. In the ATE market, the Company competes primarily against Vitesse and silicon ECL and BiCMOS products offered principally by semiconductor manufacturers such as Analog Devices, Lucent Technologies and Maxim. In the high-speed computing market, the Company competes against companies such as Chrontel and PLX. Many of these companies and potential new competitors have significantly greater financial, technical, manufacturing and marketing resources than the Company. In addition, in lower-frequency applications, the Company faces increasing competition from other CMOS-based products, particularly as the performance of such products continues to improve. There can be no assurance that the Company will be able to develop
new products to compete with new technologies on a timely basis or in a cost-
effective manner. Any failure by the Company to compete successfully in its
target markets, particularly in the telecommunications and data communications markets, would have a material adverse effect on the Company's business, financial condition and results of operations. |