ATI's Position

Obviously ATI is also very excited about the acquisition, but from ATI's perspective the motivations for and benefits of the acquisition are a bit different.

ATI's goal is to continue to grow at a rate of 20% per year, but maintaining that growth rate becomes increasingly more difficult as an independent GPU manufacturer. The AMD acquisition will give ATI the ability to compete in areas that it hasn't before, while also giving the company the stable footing it needs to maintaining aggressive growth.

From ATI's position, it's NVIDIA that is left out in the cold as Intel is surely not going to support NVIDIA enough to be a truly great partner. ATI will have AMD, and Intel is content being fairly self sufficient, so unless NVIDIA becomes a CPU manufacturer, its future is bleak according to ATI.

Preparing for the Inevitable Confrontation with Intel

From ATI's standpoint, it's only a matter of time before the GPU becomes general purpose enough that it could be designed and manufactured by a CPU maker. Taking the concern one step further, ATI's worried that in the coming years Intel will introduce its standalone GPU and really turn up the heat on the remaining independent GPU makers. By partnering with AMD, ATI believes that it would be better prepared for what it believes is the inevitable confrontation with Intel. From ATI's perspective, Intel is too strong in CPU design, manufacturing and marketing to compete against when the inevitable move into the GPU space occurs.

Competing with NVIDIA is Tough, this Makes it Easier

It's no surprise to anyone that competing with NVIDIA isn't easy; the easiest time ATI had competing with NVIDIA in recent history was back during the Radeon 9700 Pro days, but since then NVIDIA has really turned up the heat and currently enjoys greater desktop market share. Not only does it have greater desktop market share, but NVIDIA also enjoys greater profit margins per GPU sold thanks to smaller die sizes. By being acquired by AMD, ATI gets a bit of relief from the competition with NVIDIA, as well as some potential advantages. Those advantages include the potential to build and execute better AMD chipsets as well as gaining greater overall graphics market share by shipping more platforms with integrated graphics (either on CPU or on chipset). Intel is actually the world's largest graphics manufacturer, since the vast majority of Intel systems sold ship with some form of Intel integrated graphics; through this acquisition, AMD can use ATI to do the same, which should increase ATI's overall market share.

Making Better AMD Chipsets

ATI has struggled to design, manufacture and execute a chipset that could compete with NVIDIA's nForce line. To date, ATI has come close but not been able to close the deal and it has been trying for years. In theory, with better access to AMD engineers and designers, being able to leverage AMD's IP (e.g. CrossFire implemented over Hyper Transport) and eventually being able to use AMD's fabs, ATI could design a truly competitive platform for AMD processors. As long as the product is decent, AMD would also be able to significantly increase sales by simply offering attractive platform bundles similar to what Intel does today. Whether the approach is more similar to Centrino where AMD requires that you purchase only AMD silicon, or more like how Intel does business on the desktop side where AMD makes sure that only its chipsets are available at launch has yet to be seen.

The Manufacturing & Design Advantage

Currently both ATI and NVIDIA have to turn to third party manufacturers to produce both their chipsets and GPUs. If this acquisition were to go through, AMD could eventually begin manufacturing some chipsets or GPUs for ATI. By manufacturing components in house, ATI would be able to enjoy a cost advantage over competing NVIDIA products (especially if ATI is simply using leftover capacity at older fabs that are awaiting transition to smaller manufacturing processes). ATI could potentially begin to release GPUs using newer process technologies before the competition as well, reducing die size and increasing clock speeds at the same time.

Manufacturing aside, there's also this idea that companies like AMD and Intel are better at designing silicon because they work on a more granular level with the design. There's far more custom logic in Intel's Core 2 Duo than in NVIDIA's GeForce 7900 GTX; ATI would gain access to AMD's entire portfolio of custom logic and may be able to implement some of it in its upcoming GPUs, giving ATI a performance and efficiency advantage over NVIDIA.

It Makes Financial Sense

Of course the actual acquisition itself is very beneficial to ATI's investors, as the deal is mostly cash and thus little risk is assumed on behalf of ATI investors. ATI's stock has been doing quite well since the announcement, and why shouldn't it? The #2 x86 microprocessor maker wants to buy ATI.

What about Intel Chipsets?

Currently 60 - 70% of ATI's chipset revenues come from Intel platforms, but ATI expects that number to decline significantly over the coming months. While the current 6 month roadmap won't change, beyond that ATI is not counting on incredible support from Intel so ATI will begin focusing its efforts on AMD platforms exclusively at that point. If Intel wants ATI chipsets, ATI will supply them. And if you're wondering, CrossFire will continue to work on Intel chipsets.

Keep in mind that when we say 60-70% of ATI's chipset revenues come from Intel platforms, that doesn't actually mean ATI is selling a ton of chipsets. ATI accounts for slightly less than 10% of Intel platform chipsets sold recently, and about one fourth of AMD platform chipsets. However, even though they sell a decent number of chipsets, the quality of ATI chipsets has been considered something of a distant third place, with Intel and NVIDIA in the lead. ATI could lose all of their Intel chipset sales and still come out ahead if they can become the dominant chipset for AMD platforms.

AMD's Position NVIDIA's Position
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  • sykemyke - Wednesday, August 9, 2006 - link

    Hey, why don't we just put FPGA block on the cpu?

    This way, programmer could create really new Assembly command, like 3DES or something..
  • unclebud - Monday, August 7, 2006 - link

    it was good to just read any sort of article from the site owner.
    was feeling that the reviews section had just fallen into the depths of fanboyism, so it was good just to hear somebody at least sometimes impartial THINKING out loud rather than just showing off.
    what's really interesting to me is that the whole article mimics what was written in the latest (i think) issue of cpu from selfsame author.
    good issue incidentally. will buy it from wal-mart hopefully tomorrow (they have 10% off magazines)
    cheers, and keep representing -- i still have the 440bx benchmarks/reviews filed away in a notebook
  • jp327 - Sunday, August 6, 2006 - link

    I'm not a gamer so I usually dont follow the video segment, but looking at the Torenza
    slide on page 2(this article), I can't help but see the similarity between what amd forcasts and the PS3's Cell architectuter:"> cell"> K8L

    Doesn't AMD have a co-op of some sort w/ IBM?
  • RSMemphis - Sunday, August 6, 2006 - link

    I thought you guys already knew this, but apparently not.
    Most likely, there will be no Fab 30, it will be re-equipped to be Fab 38, 300 mm with 65 nm features.
    Considering all the aging Fabs out there, it makes sense to have the 90 nm parts externally manufactured.
  • xsilver - Saturday, August 5, 2006 - link

    of the 5.4b of ATI's purchase price, is most of that due to intellectual property?
    i mean as you state, ATI has no fabs.

    and then regarding the future of GPU's, with CPU's now becoming more and more multithreaded, couldnt it be fathomable that some of the work be moved back to the cpu in order to fill that workload?
    unless of course gpus are also going multithreaded soon? (on die, not just SLI)
  • eugine MW - Saturday, August 5, 2006 - link

    I had to register just to say well written article. It has provided me with much more information regarding the merger than any other website.

    Greatly written.
  • MadBoris - Thursday, August 3, 2006 - link

    How is the GPU on a CPU even considered a good idea by anyone?

    GPU bandwidth + CPU Bandwith = how the hell are mobo bus's and chipset going to handle all that competing bandwidth from one socket. Either way their is crazy amount of conflicting bandwidth from one socket, I doubt it can be done without serious thrashing penalties.

    When I want to upgrade my video card, I have to buy some $800 CPU/GPU combo. :O

    Call me crazy, but that sounds like an April fools joke. But who's kidding who?

    It's doom and gloom for PC gaming, and AMD just made it worse.
  • JarredWalton - Thursday, August 3, 2006 - link

    Considering that we have the potential for dual socket motherboards with a GPU in the second socket, of a "mostly GPU CPU" in the second socket, GPU on CPU isn't terrible. Look at Montecito: 1.7 billion transistors on a CPU. A couple more process transitions and that figure will be common for the desktop CPUs.

    What do you do with another 1.4 billion transistors if you don't put it into a massive L2/L3 cache? Hmmm... A GPU with fast access to the CPU, maybe multiple FSBs so the GPU can still get lots of bandwidth, throw on a physics processor, whatever else you want....

    Short term, GPU + CPU in a package will be just a step up from current IGPs, but long term it has a lot of potential.
  • dev0lution - Thursday, August 3, 2006 - link

    1. There was no mention of the channel in this article, which is the vehicle by which most of these products make it to market. Intel and Nvidia have a leg up on any newly formed ATI/AMD entity, in that they make sure their partners make money and are doing more and more to reward them for supporting their platforms. AMD has been somewhat confused lately, trying to keep their promises to their partners while trying to meet sales goals on the other.

    2. Intel and Nvidia could ramp up their partnership a whole lot quicker than AMD/ATI can (no pesky merger and integrating cultures to worry about), so now you have Nvidia with a long term, very gradual share shift on the AMD side with a quicker ramp up on the Intel side of things to replace ATI's share. Intel and Nvidia in the short term end up doing pretty well, with plenty of time to develop next gen platforms to compete with whatever the long term AMD/ATI roadmap looks like.

    3. AMD/ATI got more publicity and PR over this whole deal than they probably could have gotten with their annual marketing budgets combined. Everyone inside and outside the tech world have been talking about this merger which isn't a bad way to get brand recognition for no additional investment.
  • s1wheel4 - Wednesday, August 2, 2006 - link

    This will be the end of AMD and ATI as we know them today....and the end of both in the high end enthusiasts market...when merged; the new company will be nothing more than a mediocre company both of which will lag behind Intel and NVIDIA in performance.

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