They're still going to sell in the hundreds of millions a year. AMD isn't big enough to fight both fights right now - it should focus on the PC, Mac, and server markets for at least the next few years.
Will the Fusion A series that will hit the market in a couple months be the chip that puts AMD back on top, at least in terms of delivering the processor you want to have in your new laptop or all-in-one desktop? I'm not convinced. The architectural tweaks to the Phenom II-based CPU cores, 32nm manufacturing process, new power-saving features, and powerful integrated graphics make for a potent combo.
Still, Intel is just too far ahead. Llano is likely to be the king of integrated graphics performance by a wide margin, but tasks that stress the CPU cores will still be considerably faster on 2nd generation Core CPUs. What AMD needs is a new CPU core design. That's coming later this summer (probably) with the product code-named Bulldozer. It's such an unusual take on multi-core design that I really have a hard time predicting if it can beat the Intel chips of comparable price and power usage. Even if it does, it'll be another year before Bulldozer cores end up in a Fusion-style combination CPU and GPU, and Intel will be well into its 22nm chips by then.
For AMD to stay relevant, let alone deliver the "gotta have it" processor for future laptops and desktops, it really needs to remain focused, shorten the time between its major architectural design revisions, and work with its manufacturing partners at GlobalFoundries and TSMC to somehow shorten the manufacturing process lead Intel enjoys.
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