Industry risk report: semiconductors.It can be a not-so-lab world for companies in the semiconductor and electronics technology industries. Their risk managers must compute To perform mathematical operations or general computer processing. For an explanation of "The 3 C's," or how the computer processes data, see computer. the risks of owning fabrication fabrication (fab´rikā´sh  n),n the construction or making of a restoration. plants versus the risks of outsourcing (1) Contracting with outside consultants, software houses or service bureaus to perform systems analysis, programming and datacenter operations. Contrast with insourcing. See netsourcing, ASP, SSP and facilities management. production, while they must also keep on their monitor issues associated with product liability, intellectual property. environmental legislation, and all the other everyday risks of a global, rapidly evolving and highly complex business.
INDUSTRY RISK REPORT SEMICONDUCTORS
Company Name Location CRO
Advanced Micro Devices Sunnyvale, Calif. Caye Hursey, Treasurer
Inc.
Analog Devices Inc. Norwood, Mass. Paul Miles, Director,
Risk Management
Applied Materials Inc. Santa Clara, Calif. Andrea Soriano
Intel Corp. Santa Clara, Calif. Diane Labrador,
Assistant Treasurer,
Risk Management
Jabil Circuit Inc. St. Petersburg, Fla. Thomas Rittenhouse,
Director, Risk
Management
Micron Technology Inc. Boise, Idaho JoAnne Arnold, VP, Human
Resources
Sanmina-SCI Corp. San Jose, Calif. Walter Boileau, VP,
Treasurer
Solectron Corp. Milpitas, Calif. Kathleen Pickard,
Insurance Risk Manager
Texas Instruments Inc. Dallas, Texas Charlie Tobin, Vice
President of Treasury
Services
Vishay Intertechnology Malvern, Pa. Richard N. Grubb, EVP,
Inc. Treasurer
2004 Total
Company Name CFO Revenue
Advanced Micro Devices Robert J. Rivet $5,001 million
Inc.
Analog Devices Inc. Joseph E. McDonough $2,633 million
Applied Materials Inc. Nancy H. Handel, SVP $8,013 million
Intel Corp. Andy D. Bryant, EVP, $34,209 million
Chief Financial and
Enterprise Services
Officer
Jabil Circuit Inc. Forbes I.J. Alexander $6,252 million
Micron Technology Inc. W.G. Stover Jr., VP, $4,404 million
Finance
Sanmina-SCI Corp. David White, EVP $12,204 million
Solectron Corp. Warren Ligan, SVP, $11,638 million
Corporate Controller,
Interim CFO
Texas Instruments Inc. Kevin March $12,580 million
Vishay Intertechnology Richard N. Grubb, $2,413 million
Inc. EVP, Treasurer
No. of Primary
Company Name Employees Broker Captives
Advanced Micro Devices 15,900 Withheld No
Inc.
Analog Devices Inc. 8,900 Withheld No
Applied Materials Inc. 12,600 Aon, Marsh No
Intel Corp. 91,000 Marsh, Aon Electronics
Technology
Insurance Co.
Inc. (Bermuda),
Technology
Assurance Ltd.
(Hawaii)
Jabil Circuit Inc. 34,000 Withheld No
Micron Technology Inc. 17,900 Various No
Sanmina-SCI Corp. 48,721 Withheld No
Solectron Corp. 57,000 Marsh, Woodruff- No
Sawyer, JLT Risk
Solutions, RSC
Insurance
Texas Instruments Inc. 35,472 Withheld Texas Instruments
Insurance Ltd.
(Bermuda)
Vishay Intertechnology 25,700 Willis No
Inc.
Company Name Risk Exposure:
Advanced Micro Devices Indebtedness that could adversely affect the
Inc. company's financial position; market
acceptance of new technologies; an industry
that is highly cyclical and experiences severe
downturns; need to keep pace with new product
designs and improvements industrywide; costs
related to defective products; supply of
essential equipment or materials to
manufacture products.
Analog Devices Inc. Risk of relying on third-party subcontractors
and manufacturers and inability to control
their availability or conditions of supply;
risks related to proprietary rights and
intellectual-property litigation; economic,
political and other risks associated with
significant worldwide operations; fluctuations
in foreign-currency exchange rates.
Applied Materials Inc. The volatility, unpredictability and
competitiveness of the industry and the risks
associated with its ongoing changes; the risks
of operating a global business; manufacturing
interruptions or delays that affect ability to
meet customer demand; various risks related to
the regulatory environment.
Intel Corp. Normal operational and global risks: new
product strategies; production process errors
and interruptions; product defect or errata;
terrorism; crime and political instability;
employment practices and labor rights issues;
currency controls and fluctuations; tariff
and import regulations; legal and regulatory
risks; intellectual property; environmental,
health and safety exposures; hazard exposures
such as fire, flood, windstorm, etc.
Jabil Circuit Inc. Risk exposures centered around manufacturing,
such as failure on an epidemic scale, material
liability and testing.
Micron Technology Inc. Decreased demand for products; generation of
sufficient cash flows to fund operations and
make adequate capital investments; changes in
foreign currency exchange rates that adversely
affect business; current economic and
political conditions; risks associated with
our international sales and operations;
disruptions in raw material supplies.
Sanmina-SCI Corp. Greater competition in the industry requiring
us to reduce prices for our services; changes
in customer demand and sales volumes; pricing
pressures from original equipment
manufacturers; charges or write-offs of excess
and obsolete inventory; pricing pressure on
electronic components resulting from economic
conditions in the electronics industry.
Solectron Corp. Concerns about operations and contaminated
sites that could be potentially harmful to the
environment; the company's dependence on a
small number of customers for much of its net
sales; risks associated with operating
internationally; the company's ability to
maximize the hours of use of its equipment and
facilities.
Texas Instruments Inc. Cyclicality in the semiconductor market that
affects company performance; rapid
technological change in the industry and the
substantial competition in product development
and pricing risks associated with legal,
political, economic or other changes
associated with doing business globally.
Vishay Intertechnology Cyclical and competitive nature of business;
Inc. effects of debt levels on market perceptions
of the company; risks of investing in
startups; raw material availability, quality
and cost; increasingly concentrated group of
customers; future changes in environmental
liability and compliance obligations.
Company Name Risk Strategies:
Advanced Micro Devices The company modifies manufacturing processes
Inc. regularly to improve yields and product
performance and decrease costs. Whenever
appropriate, the company hedges a portion of
its foreign currency exchange exposure to
protect against fluctuations in currency
exchange rates. In order to reduce interest
rate risk, the company invests cash in
investments with short maturities.
Analog Devices Inc. The company enters into forward foreign
exchange contracts to offset certain
operational and balance sheet exposures due
to the impact of foreign currency exchange
rates. The company maintains cash, cash
equivalents, and short-term investments and
long-term investments, and monitors the
amount of credit exposure to any one financial
institution and issuer.
Applied Materials Inc. The company applies customer partnering, use
of foundries, collaborative research and
development efforts, and process integration
support to manage risks associated with a
rapidly changing industry. The company
denominates forward exchange contracts in the
same currency as the underlying transactions
to mitigate foreign currency exchange rate
risk.
Intel Corp. The company employs aggressive risk
identification and assessment protocol
disciplined risk prevention and safety
programs; a balanced approach to risk
transfer, insurance purchasing and retention;
and robust risk-mitigation processes.
Jabil Circuit Inc. The company thoroughly reviews and assesses
the opportunity cost of risk, structures a
precautionary and measured approach to risk
acceptance, establishes mitigation and control
procedures, and identifies the most
appropriate method to fund the risk.
Micron Technology Inc. The company entered into an interest rate swap
agreement to manage interest rate risk. It
holds a number of patent and intellectual
property license agreements to offset
intellectual property rights risks. And the
company reviews the carrying value of
property, plant and equipment for impairment.
Sanmina-SCI Corp. The company's insurance coverage with respect
to natural disasters is limited and is subject
to deductibles and coverage limits. The
company holds various U.S. and foreign
patents. It is developing corporatewide
standardized environmental management systems,
auditing programs and policies to enable it to
better manage environmental compliance
activities.
Solectron Corp. The company obtained environmental insurance
to reduce potential environmental liability
exposures posed by some of its operations and
facilities. It also uses foreign exchange,
foreign contracts and interest rate swap
agreements to manage its financial risk.
Texas Instruments Inc. The company maintains product liability
insurance, and actively enforces and protects
its intellectual-property rights. The company
uses forward currency exchange contracts to
minimize adverse earnings impacts from the
effect of exchange rate fluctuations on its
non-U.S. dollar net balance sheet exposures.
Vishay Intertechnology To manage intellectual-property risk, the
Inc. company has applied for patents covering
technologies and products. The company
establishes reserves for specifically
identified potential environmental liabilities
and entered into interest rate swap agreements
to manage interest rate risk related to our
multicurrency revolving line of credit.
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