Greg,
Found a reference to "several" but no confirmation of my imagined "three" ECMs. From Management Discussion of Risks 10-K 2/9/00.
The Company currently relies on several independent foundries to manufacture its semiconductor products either in finished form or wafer form. Generally, the Company conducts business with some of its foundries through written purchase orders as opposed to long-term supply contracts.
The Company is using multiple sources of supply for certain of its products, which may require the Company's customers to perform separate product qualifications.
The Company has not, however, developed alternate sources of supply for certain other products and its newly introduced products are typically produced initially by a single foundry until alternate sources can be qualified. In particular, the Company's integrated single chip Fibre Channel controller is manufactured by LSI Logic and integrates LSI Logic's transceiver technology.
The Company's ability to obtain satisfactory wafer and other supplies is subject to a number of other risks.
the Company's flexibility to move production of any particular product from one foundry to another can be limited in that such a move can require significant re-engineering, which may take several quarters. These efforts also divert engineering resources which otherwise could be dedicated to new product development, which would adversely affect new product development schedules. Accordingly, production may be constrained even though capacity is available at one or more foundries.
(so much for my comment about flexibility)
In addition, the Company could encounter supply shortages if sales grow substantially. The Company uses domestic and offshore subcontractors for die assembly of its semiconductor products purchased in wafer form, and for assembly of its host adapter board products. The Company's reliance on independent subcontractors to provide these services involves a number of risks, including the absence of guaranteed capacity and reduced control over delivery schedules, quality assurance and costs.
TRANSACTIONS TO OBTAIN MANUFACTURING CAPACITY; FUTURE CAPITAL NEEDS
The Company is not currently experiencing any difficulties in obtaining sufficient foundry capacity due to the current availability of worldwide semiconductor fabrication capacity. However, the Company and the semiconductor industry have, in the past, experienced shortages of available foundry capacity.
Accordingly, in order to secure an adequate supply of wafers, especially wafers manufactured using advanced process technologies, the Company may consider various possible transactions, including the use of "take or pay" contracts that commit the Company to purchase specified quantities of wafers over extended periods or equity investments in, or advances to, wafer manufacturing companies in exchange for guaranteed production capacity, or the formation of joint ventures to own and operate or construct foundries or to develop certain products.
(costly if necessary, but affordable if prudent).
Douglas
PS - Still haven't found anything in the 10-Q or 8-K worth Herb's admonition. Does he even know what he's talking about? |
