AMD Eyes PC-on-a-Chip with ATI Buy

Advanced Micro Devices plan to acquire ATI Technologies, could ultimately boil down to providing a simpler approach to building basic business PCs.

AMDs planned $5.4 billion acquisition of ATI, announced July 24, will cap several recent announcements by the Sunnyvale, Calif., chip maker.

All of the efforts focus on packing more technology into PCs and servers that use AMD chips. The companys Torrenza program, for one, encourages third parties to build accelerator chips that plug into its platforms.

Resource Library:

But the ATI acquisition will put a new spin on the recent efforts by offering even tighter integration between AMD processors and their supporting chips.

Ultimately, AMD aims to roll its own processor cores and ATIs graphics processors into one, creating new a type of PC-on-a-chip processors.

Meanwhile, through the tighter integration of its processors and supporting chips, AMD could offer price breaks and support programs, such as stability and reliability guarantees, that appeal to business PC makers such as Dell, HP and Lenovo, allowing it to compete more closely for corporate business with its larger rival, Intel.

Click here to read about AMDs quad-core chip and other technology plans.

But "the holy grail of integration for ATI and AMD is going to be an integrated processor—a combination of a graphics processor and a processor," said Dean McCarron, principal analyst at Mercury Research in Cave Creek, Ariz.

"I think that is, first and foremost, the most direct product result of this particular merger."

Indeed, enabling PC makers to build a low-cost commercial desktops using fewer chips is one potential market opportunity AMD could address by offering an integrated processor, said Bruce Shaw, director worldwide commercial marketing at AMD, in New York, where AMD announced its ATI acquisition.

"If you can get the cost down on the product itself, performance may not be the ultimate" when it comes to building a desktop, he said.

"That is one of the things that were heavily looking at and saying, This gives us the ability to attach a market from a different vector that we had before."

The plan will take time. AMDs first step is likely to be toward offering delivering more tightly linked chip platforms for products such as corporate notebooks.

Those platforms could be offered at lower prices, thanks to the mergers economies. AMD would also likely back them with stability and reliability guarantees for corporate systems.

"One of the things [AMD] can tout almost immediately is the stability message. They can begin to talk up the commercial story right away," said Roger Kay, president of EndPoint Technologies Associates in Wayland, Mass.

"People talk about all the risks of the deal—and there are a bunch—but the upside is that if [AMD] can get any traction at all in commercial, that represents a pretty good position."

Next Page: Shaking up the market.