What’s happening with AMD?

This morning had two bits of contradictory news for chipmaker AMD. First, AMD announced it had shipped its 50 millionth Hollywood chip, the chip that provides the Nintendo Wii with is graphic processing capabilities. Second was a report by Moody’s which listed AMD as among one of the 283 American companies most likely to file for bankruptcy.

Moody’s stated that companies that comprise it’s Bottom Rung listing have “high default risk and weak liquidity,” and the agency suggests that up to 45 percent of these companies could default on their debt this year. Incidentally, that list also included American hallmarks such as Palm, Eddie Bauer and two top tier American network providers, Global Crossing and Level 3 Communications. Moody’s track record for predicting the success or demise of companies hasn’t been the greatest of late, since it largely failed to predict the decline of so many companies that have since been badly hurt by the recessionary financial climate.

This gets me back to AMD. I really don’t want to see this company fail. AMD represents the only true competitor to two huge industry giants, Intel and Nvidia. As a PC gamer, I’ve enjoyed having a choice in choosing an Intel processor or the AMD equivalent or choosing between Nvidia and ATI (which is owned by AMD).

Consumer choice fuels competition, and the battle between these companies have been generally good for consumers with price discounts following releases of new technology. Budget conscious consumers have always been able to count on buying a generation behind and getting good value for reasonable prices. In addition, competition have kept the companies honest, generally encouraging them to stay with agreed upon standards for hardware and provide compatibility to older componentry.

Competition between Intel and AMD have fueled choice, lower prices and innovation.

Much of that will change if AMD goes under, removing the only real competition faced by Intel and Nvidia. And as we’ve seen with Microsoft, lack of competition allows a company to release less than stellar (or even shoddy) products and pass it off as an improvement. I’m not eager to see the Windows Vista equivalent in Intel processors, and I feel that it will be a forgone conclusion when the competitive pressure to innovate is removed.

Intel’s own past pretty much shows that it’s inclined towards mediocrity when it isn’t challenged. The emergence of AMD in the late 1990s and it’s adherence to the old Socket A architecture was almost a direct consequence of Intel’s arrogance. AMD’s arrival showed Intel that it would lose both market share and technological superiority if it assumed it could do whatever it wanted in the market, forgoing consumer desires for compatibility and low prices.

Unfortunately for AMD, the PC computer market is awful. When people are worrying more about their mortgages and putting food on the table, a new PC purchase falls to the bottom of their priorities. Plenty of evidence suggests that people are forgoing new PC purchases and looking to get more life out of their existing hardware.

That doesn’t necessarily mean that it’s all bad news. One of the most commonly upgraded items for an older computer is a video card. While the latest and greatest (and most expensive) video cards may see a decline in sales, middle of the road or budget cards which are compatible with older hardware *should* see an increase. And of course, sales of every Nintendo Wii should help out as well.

It’s honestly a little too early to see what will happen to AMD. Is the company on solid ground as the Nintendo Wii continues to sell well or is it on the verge of bankrupcy? I’m hopeful it’s the former. I don’t want to return to the old days when Intel was the only game in town.

Party sourced from Ars Technica and Joystiq.

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