AMD is expected to announce today that it is going to split the company into two distinct operations. One operation will be in charge of designing microprocessors and the second company will handle the business of manufacturing the chips. AMD is hoping to inject funds into both operations that will hopefully make it a true rival to Intel. AMD has been struggling during the past few years as Intel appeared to once again take the lead in developing new and faster chips.

In a recent article it states that:

Under the deal, two Abu Dhabi investment companies will invest $6 billion into both companies so that AMD can build a planned factory near Albany, N.Y., and upgrade a Germany factory. AMD will own 44.4 percent of the new entity, to be named the Foundry Company. The Advanced Technology Company, formed by the Abu Dhabi government, will own the rest.

AMD put up a valiant fight against Intel, starting in 2003, when it launched the Opteron processor. The design was both energy and memory efficient, helping to cut electricity costs just as they were spiraling out of control for data center managers. It took years for Intel to recover.

But the world’s biggest chip maker had many times more engineers than AMD and far more money to pour into factories. In 2006, Intel came up with a better chip design, based on its Core architecture. It retook just about all of the market share that AMD had gained.

Intel’s resurgence made this outcome inevitable. AMD lost money and was on the ropes; in June, it had $5.3 billion in debt and $1.6 billion in cash. The investment in the chip-making process for upcoming 45-nanometer factories is so big that chip makers would have to generate $13 billion over five years to justify the investment.

Now it has come to this. Intel will be competing against foreign governments. They are so far willing to put up the multibillion-dollar ante that it takes to compete head on with Intel. The Foundry Company will make chips for AMD and other customers too. It will in effect be a contract chip manufacturer and it will license chip manufacturing processes from IBM.

No matter where the money is coming from, we need AMD to keep Intel honest. If it were not for AMD, one could only imagine how much we would be paying for computers, since I doubt Intel pricing would be as low as it is for their CPU’s.

What do you think? Is it good to keep AMD around as an Intel rival?

Comments welcome.