If you haven’t already heard, Intel last week announced a recall for all of its new Sandy Bridge processors because of a faulty chipset.  The massive recall is expected to be one of the worst in the company’s history and may cost over $1 billion in expenses and lost revenues.  Before the problem was found, an estimated 8 million chips were shipped to OEMs and a reported half million were already installed in completed systems.  No one knows exactly how many systems made it into customer hands, but manufacturers and retailers have been scrambling in the past week to find a quick solution to this problem.  Not only is Intel’s announcement a major setback for the chip maker, but it also opens a huge opportunity for rival AMD, which for years has been a distant second in the global microprocessor market.

Intel’s Sandy Bridge CPU

Perhaps one of AMD’s biggest opportunities is with PC retailers, who have been left with empty store shelves recently occupied by Intel-equipped PCs.  Intel decided to release its high-end Core i5 and i7 chips first, so retail assortments are now missing many high-profile, high-priced desktops and notebooks.  Last Tuesday, Best Buy was forced to pull Dell’s new Studio XPS 8300 models ($749 and $1,099), as well as Asus’ CG1850-04 ($899), which represented 50 percent of the chain’s first quarter premium tower desktop assortment.

Best Buy’s Most Recent Sunday Circular and Online Disclaimer

Not only are existing products being pulled from shelves, but performance PCs that were expected to replace older in-store models are being put on hold as well.  The last thing manufacturers and retailers want to do in this situation is knowingly sell faulty hardware to performance customers, who know their products better than anyone and who are often the early adopters and trend setters in the PC market.

So the question for OEMs and retailers is, what products do you put on the empty shelves?  Right now, the options are fairly limited…either retailers can find systems running first generation Intel Core chips, or find a suitable replacement running an AMD processor.  According to claims from AMD, many retailers and OEMs are doing the latter and asking the company if they have suitable chips in their portfolio that can substitute for Intel’s technology.  Given how hard it is to grow shelf space and market share, this opportunity is incredibly important for AMD to capitalize on.  Specifically, consumer electronics chains, which have favored Intel-based systems, represent the biggest opportunity for AMD, and its brand, which for years has had to battle its way out from under the shadow of Intel.

Despite a relatively small share of the global microprocessor market, AMD has maintained a strong and growing position in the US desktop retail market, due to its dominance in entry and mid-level offerings.  During January, gap intelligence saw AMD surpass Intel’s Desktop CPU shelf share, and for the month of February the chip maker is expected to improve its position further, as faulty Intel systems will be replaced by AMD-based performance desktops, a segment that AMD has had difficulty penetrating until now.

The true test of AMD’s success this year will come when Intel finally recovers from its recall and ships chipsets for its Sandy Bridge processors.  Moving forward, will resellers diversify and stock more AMD PCs?  Can AMD maintain its shelf and market share gains after this recall period? And will this recall result in more demand and improved customer perception for the AMD brand?  We probably won’t know for certain until April at the earliest, when Intel is expected to reach full volume capacity again.  One thing is for sure …this year is shaping up to be one of the most exciting for the processor and PC industry in a long time!