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.
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.
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.”
Shaking Up the Market
But such moves would only set the stage for new products the company hopes will shake up the market.
During 2008 and beyond, the combination of AMD and ATI combined with the increasing chip transistor budgets made possible by more advanced manufacturing technologies will allow for all-new products, such as integrated processors, said Dirk Meyer, AMDs president, during July 24 conference call with analysts.
“As we look toward ever finer manufacturing geometries, we see the opportunities to integrate CPU [central processing unit] and GPU [graphics processor unit] cores together on a single die to serve some segments,” Meyer said.
“In the long term, we see the opportunity to leverage both [CPU and graphics] technologies on a per-application basis.”
The results are likely to be multicore chips that offer one or more processor cores with built-in graphics processing and an integrated memory controller.
AMD could market such as along with an in-house, ATI-designed chip set offering lower prices to PC makers, while guaranteeing reliability and stability that business PC buyers demand, McCarron said.
“The cost question is one of the pieces to it. The net of it is in a number of different segments that AMD and ATI, for that matter, participate in would be benefited by some cost reductions and better integration,” he said.
Indeed, AMD typically works to win extra business from PC makers that already use its chips.
The chip maker might use its new chip set and graphics business or even its integrated chips to win more business from companies such as Dell, which recently announced plans to offer and Opteron processor-based server.
“Dell, particularly, has a commercial emphasis. Thus Dell has a lot of those customers that AMD doesnt have,” Kay said.
“Itd be easy for Dell, looking for an excuse to pick up AMD, to be able to talk it up as a stable platform strategy. Thatd be helpful if Dell is trying to make a decision on how far to commit to AMD.”
Later, AMD may take integration even farther by creating hybrid processors or processor cores that combine the capabilities of a traditional CPU and a traditional graphics processor, Meyer said.
Meyer offered no details on the plan. However, “I could see some sort of blending happening between the CPU [central processing unit] and the GPU [graphics processing unit],” McCarron said.
On a multicore chip, “nothing prevents one of those cores from being a graphics processor or a physics engine—or both—or having a graphics controller in there as well,” he said.
“What Id suspect would happen is that some graphics functionality would be integrated, but some external graphics may be also be present. Partition the graphics between the processor and the external in such as way as to reduce the cost of the joint platform.”
Breakthrough technology could continue to aid the company, whose goal is to serve at least one-third of the PC processor market in the future.
“Mobility and commercial are [the] most immediate areas for growth” for the combined AMD-ATI entity, Hector Ruiz, AMDs CEO, said during a conference call with analysts.
“For us to be able to [grow in those areas], the one thing our customers were insisting on is we had to play a bigger role in the ecosystem of those products,” he said.
“Therefore, ATI is a perfect match to the needs for which customers have been asking us for some time.”