PCs and mini-computers were fundementally different, applications written for one would, generally, not work on the other.
They are both computers and the functions they serve are no different at all That's like saying a PC and a Mac are fundamentally different because their software was incompatible. The mere fact that software written at the time for one wouldn't work on the other could not be less important. What is important is the job they did. PCs gradually took over all the jobs we once used mini-computers for and the companies that built to those products went away. DEC was bought by Compaq, etc. Companies that come late to the party on the new technology often (though not always) have a hard time catching up. Intel underestimated the growth of mobile chips and now is scrambling to catch up to ARM and it isn't clear if they will succeed. And if Intel is having a hard time I can't see AMD having an easier time of it.
When low end tablets become more powerful: AMD has the products to just slot in and take advantage.
Several flaws with that reasoning. 1) Other companies have competing products already and AMD would have to provide a compelling reason to switch from their competitors who already are in place. Displacing an existing customer relationship is difficult at the best of times. 2) AMD products generally do not have any significant and lasting technological advantage over their competitors. 3) AMD is not the lowest cost producer (that would be Intel) and really cannot compete effectively on price. Intel can easily undercut them on price at almost any time and still make money doing it. 4) What is good enough now will not be good enough in a year and AMD's competitors products will improve in the mean time. Waiting for the market to come to them is a VERY dangerous strategy.
No, AMD is not locking itself out of this market.
There is a very good chance that they are. Given their sadly pathetic track record I'd inclined to be doubtful of their chances until shown evidence to the contrary. AMD has mostly made good products but they generally always seem to be a step behind the curve