Why would intel want AMD at 1-2% market share? They wouldn't. AMD allows intel to point to regulators and say 'we have competition'. That doesn't work so well when you're competitor has 1% marketshare, but it does when they're at 15-20%. The actual percentage is less important than the market segmentation. AMD is only competitive with intel in extremely low margin, low cost, but high volume processors and in high margin, very low volume server chips. Intel dominates in the segments that make money. Desktop chips above $100, 1S and 2S workstations and severs. Intel makes a lot more money on processors sold than does AMD.

It's patently obvious from intel's current behavior that they; have AMD about where they want them and they don't want to push them any further due to government regulators. Intel could cut the prices for Clarksdale processors in half and take AMD out of the cheap desktop chip game over night if they wanted to. They could go back to a 2-year tick-tock cycle if they wanted to. That would allow them to be pushing out the 22nm Ivy Bridge chips a quarter or two after AMD launches 32nm Bulldozer, an architecture that will probably draw even with Nehalem and Westmere. But they won't because it would draw heat from the EU, Japanese, and the American trade regulation bodies.

The success of the K8 has a lot to do with AMD being smart, but it has even more to do with intel being stupid. Intel wanted to segment the market between the Pentium IV and the Itanium. It wanted desktops running the P4 and it wanted every server to be a mid-range or high-end box running Itaniums. They both had the same problems. The Pentium IV, while still x86 required a recompile to see the best performance. It also consumed way too much power. The Itanium and it's completely new IA-64 ISA didn't work well with the backend applications companies ran without the software vendors rewriting their code. Intel overstretched and AMD took advantage of it.

It wasn't AMD's success that allowed them to produce the best performing chips on the market, it was intel's failure. Intel actually had an architecture just as fast as the K8 in the Banias/Dothan but only used them for laptops. If they'd designed desktop/low-end server chips around that micro-architecture in 2003/4 instead of 2006 AMD wouldn't have gotten the Opteron off the ground.

Do you really think that intel will be that shortsighted again? I don't. I don't think that they particularly liked not having the fastest chips running an ISA that they invented. I don't think that they much cared for what it did to their business.

Yes, AMD spends a lot on R&D. Do they get much out of it? Not really. The only world-class semiconductor products that AMD makes are from the ATi division. While intel spends a lot less as a function of their total income, they certainly get more out of it. They have the best x86 chips, they have the best SSD controller on the market, they're the only company that seems to be making any progress on PCM (NAND's replacement), they have one of if not the best RAID ASICs.

Finally, semantics aside, intel and AMD do not trade the performance crown. People seem to think that AMD and intel trade off having the faster chip every couple of years. This is not true. 90% of the time, intel has the faster chips. They have more patents, they have more engineers, they have better fabs, they have more money. It's just that the x86 world order has gone back to it's normal state with intel a generation and node ahead and AMD selling cheap chips. Any lead AMD has in any particular market segment is because either intel is EOLing one product line and getting ready to introduce another (4S/8S) or it's a market that intel sees little value proposition in playing ($50 desktop chips).