Pursuant to the WSA, we are required to purchase all of our
microprocessor and APU product requirements from GF with limited exceptions. If GF is unable to achieve anticipated manufacturing yields, remain
competitive using advanced process technologies, manufacture our products on a timely basis, or meet our capacity requirements, then we may experience
delays in product launches or supply shortages for certain products and our business could be materially adversely affected. For example, during the third
quarter of 2011, GF experienced yield and other manufacturing difficulties related to 32nm wafer fabrication, resulting in lower than expected supply of 32nm
products to us. Also in the third quarter of 2011, we experienced supply constraints for our 45nm microprocessor products from GF due to complexities
related to the use of common tools across both 32nm and 45nm technology nodes and because we made the decision to shift volume away from products
manufactured using the 45nm technology node in order to obtain additional 32nm products. Because we were supply constrained with respect to 32nm and
45nm wafers, our revenues and gross margin in the third quarter of 2011 were adversely impacted. Also, during the fourth quarter of 2011, we experienced
reduced supply of 45nm product from GF because of a manufacturing disruption that reduced the number of 45nm wafers available for production.