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AMD; Down On It's Luck Again

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Hardware

Those of us aware of AMD's tremendous potential as a chipmaker have to be disappointed by Apple's recent news that it has chosen Intel as the sole chip provider for its Macintosh computers. In addition to the Apple news, AMD continues to strike out many of the world's largest PC OEMs, such as Dell. If the Apple news is true, this would come as a yet another financial hit to AMD and its strategies. Unfortunately for AMD, it is trapped in a vicious circle of supply and demand.

While manufacturers like Dell, Apple and others do care about performance, value and possible alternative chip suppliers, they always have a difficult time picking AMD as a supplier. The reason is clear: limited supply. Larger OEMs like Dell (and even Apple) demand high volumes of chips to fulfill its orders. Since AMD can't provide such quantities, it's hindering its own success in the market. We can't exactly blame AMD with this because it has to work with the limited financial resources it has.

The vicious cycle for AMD operates somewhat like this: AMD wants to expand à AMD can't expand due to limited revenue à AMD proposes OEMs to offer PCs equipped with its chips à OEMs decline due to lack of enough chips à AMD is back to square one. Clearly, this is neither AMD's nor the OEM's fault. AMD wants to supply its chips, but OEMs need enough quantity to cover the millions of PCs they retail annually.

Since Intel's business ventures go beyond making processors, it can cope with the costs of opening new fabrication facilities, thereby increasing production and offering better deals to OEMs that need to purchase quantities in the millions. Additionally, Intel can accept some losses in its chip business here and there, while AMD really can't.

Though OEMs, including Apple, are aware of the architectural issues with Intel's microprocessors, it's not much of a concern to them. The majority of the market they retail to isn't aware of the issues, and the systems are "fast enough" for the customers they are targeting. How much of the general computing population do you think will know the performance difference between dual-core Intel and AMD microprocessors? Yes, that's right - not very many. The main thing many customers are looking for is affordability and brand recognition, and Intel can definitely offer that.

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