Advanced Micro Devices (NASDAQ:AMD) has been hit pretty hard as the PC market, which still comprises the majority of the company's revenue, has been in decline over the last several years. The advent of thin and light, yet inexpensive tablets with great battery life has been particularly negative for AMD, which is highly levered to the lower end of the PC market.

With that in mind, it's interesting to note that Digitimes, a leading Taiwanese news outfit, reports that Taiwan Semiconductor is seeing an increase in orders with short lead times from its PC-levered customers. While it is still too soon to tell, if the PC market really does rebound then this could be a boon for AMD -- competitive issues and all.

AMD's competitive position isn't great
AMD's competitive position against chief rival Intel (NASDAQ:INTC) in the PC market hasn't been stellar. In terms of power efficiency and CPU performance, AMD's products have been clear laggards compared to their Intel counterparts.

Further, since Intel is on a more sophisticated manufacturing process, it is able to pack in more performance and keep a cost lead. This is why AMD struggles to maintain gross margins just south of 40%, while Intel enjoys gross margins in the 60% range.

Further, while Intel has historically neglected the low end of the PC space, where AMD's parts have traditionally been superior, it has signaled its intent to drive more aggressively into this market. In an environment of continued PC weakness, this would be extraordinarily negative for AMD and at best neutral for Intel.

Secular trends could be an offset
In a declining market, AMD would likely significantly underperform the broader PC market, as Intel would be much more aggressive about low-end share. But what about a market that has stabilized and is showing signs of a return to growth, even modest growth? In such an environment, while competitive concerns would remain, they would perhaps be dulled by positive secular trends.

In an environment where the PC is stable and AMD's PC revenues don't decline as badly as expected, its other businesses -- namely the semi-custom business -- would start to actually drive growth, rather than simply serve to try to offset a weak core business. This would fundamentally change the AMD investment thesis and make it much more attractive at these levels.

Foolish bottom line
AMD is still incredibly speculative. Management is trying to downplay the PC market, since it's declining and AMD's competitive position isn't great. But it is much more material to the investment thesis than crowded ARM servers or low-margin game-console wins.

If the PC market begins to show real signs of a recovery and a return to growth -- and if AMD's competitive position doesn't further deteriorate, another big unknown -- then the shares could be attractive. Until then, though, there are better semiconductor plays.

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Ashraf Eassa owns shares of Intel. The Motley Fool recommends Intel. The Motley Fool owns shares of Intel. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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