Like a lot of people, I thought this merger was crazy when I first heard about it. Now I can see the logic, at least from a strategy perspective.
Among other things, a computer needs a CPU, a graphics system and a chipset to tie it all together. Intel makes all three, although their graphics solutions, ummm, suck. AMD+ATI could make all three and thus better compete with Intel. Moreover, if the future is lower cost computers, integrating these three elements more tightly could lower costs.
One of the complaints from gamers is that bottom line Windows machines lack the kind of graphics power to run most games and few consumers understand the technology well enough to understand that. To play most games, you need to buy a dedicated graphics card.
Apple includes very robust video solutions in all of their computers so those consumers dont need to understand graphics cards but I suspect Apple's motivation has more to do with supporting the cool MacOS X features and applications than with games.
Now that Vista is adding similar graphics features to the OS, the baseline PC hardware needs to change. Windows machines are going to need better graphics solutions across the board. This is another reason AMD+ATI makes some sense.
AMD Plans New Class Of Multifunction Chips by '09
October 25, 2006
Wall Street Journal
Advanced Micro Devices Inc., which is expected to close its $5.4 billion purchase of ATI Technologies Inc. today, is predicting it will bring a new breed of multifunction chips to market by early 2009.
Executives of the two companies vow to design chips -- under a program dubbed Fusion -- that combine the calculating power of AMD microprocessors with accessory chips from ATI, including graphics components that draw three-dimensional characters and scenery in game software. Those product categories have long been separate, but the market is changing rapidly, they say.
One force is personal-computer demand from emerging countries, where price is paramount and fewer chips can lower costs. Another is a shift in buying patterns toward portable machines; combining graphics with microprocessors can help reduce power consumption as well as price in laptops, cellphones and other hand-held gadgets, said Phil Hester, AMD's chief technology officer.
Still another factor driving chip combinations is sophisticated software that demands better graphics -- including Microsoft Corp.'s Windows Vista, due to start arriving for business users this month. "The debate is not going to be whether a device has graphics," Mr. Hester said. "It's just going to be how much and how much does it cost."
Dave Orton, ATI's chief executive, predicted microprocessors with graphics initially could help bring PC prices to between $100 and $200, down from $400 or so.
