AMD's Chinese Market Share Quadruples, Shows No Signs of Slowing

AMD (AMD) continues to make substantial inroads into China -- projected by many to become the world's leading PC market within the next few years.

Three years ago, rival Intel (INTC) enjoyed a near monopoly in China, while AMD had only a trifling 5% market share. However, the competitive landscape began to change in 2004 when AMD inked a deal to supply chips to Lenovo, the country's largest PC manufacturer.

Since then, AMD has steadily gained ground. Today the firm controls almost 20% of the Chinese chip market, and we expect to see continued market share gains in the years ahead.

Two weeks ago, the company signed a deal with Founder Technology, another fast-growing Chinese computer maker that shipped more than 2.5 million units last year. Beginning next month, Founder's desktops will feature AMD chips. Before long, the partnership will also include laptop computers and servers.

We view this deal as yet another win for AMD as it continues to capture market share around the world. Meanwhile, despite the impact of an escalating price war, global chip sales rose to $20.5 billion during the month of August -- a new monthly record.

Chip factories are currently running at 95% utilization rates, which bodes well for the upcoming holiday season. And while growth in the mature PC market is not what it once was, demand for other applications is robust.

In fact, less than half of all chips produced this year will find their way into computers. The majority will be used to power anything from MP3 players to digital cameras to cell phones.

With the global chip market fast approaching the quarter-trillion dollar mark, we continue to believe that AMD represents a compelling investment opportunity at today's prices.

Disclosure: Author has no position in stocks mentioned