08 MAXIMUMPC DECEMBER 2006
A
MD’s strategy of expanding into the chip-
set and GPU markets by acquiring ATI
has cleared every regulatory hurdle to date,
leaving little doubt that the deal will close by
the end of 2006. Here’s what we know so far.
With AMD and ATI both playing second
banana in their respective markets, the
merger seems to be a win for each. AMD
desperately needs a foothold in both the
chipset and graphics-processing unit (GPU)
businesses to compete with Intel. Corporate
desktop and notebook makers prefer to
purchase as many components as possible
from the same manufacturer, which has
historically given Intel an edge in these mar-
kets. ATI, meanwhile, should benefi t fromaccess to AMD’s engineering and manufac-
turing resources as it wages war with Nvidia.
ATI’s chipset business generates plenty
of revenue—on the order of $80 to $
million per quarter in Intel-compatible parts
alone—but it produces relatively little bot-
tom-line profi t due to razor-thin margins.
The company has a tough time competing
against Intel for reasons that parallel AMD’s
challenges: Intel can offer hefty discounts
on its own chipsets to customers who also
purchase Intel CPUs. The ATI acquisition
enables AMD to play the same game.
ATI contracts with the Taiwanese found-
ries TSMC and UMC to fabricate its chips.
But AMD, like Intel, owns its own foundries.And like Intel, AMD should now be able to
amortize those investments over a longer
period. As the company shifts CPU pro-
duction from older 90-nanometer to newer
65nm fabs, it’ll be able to use those 90nm
factories to churn out ATI-designed chip-
sets and GPUs.
Whether ATI can continue manufactur-
ing Intel-compatible chipsets, on the other
hand, is an open question: Will Intel continue
licensing its technology to a company now
owned by its biggest rival? ATI’s RD
chipsets, which are compatible with Intel’s
Core 2 Duo and Core 2 Extreme, are ready
to go; in fact, details about an upcoming
RD600-based motherboard from DFI were
trickling onto the web as we went to
press. But that’s only one vendor; what
about the rest of the market?
Our sources tell us that ATI is con-
vinced its AMD hook-up won’t impact
its rapport with Intel, in part because
Intel has such a poor relationship
with Nvidia (my enemy’s enemy is my
friend, as it were). Any move by Intel
to revoke ATI’s bus license might also
draw unwanted attention from U.S. and
European anti-trust forces. We predict
that attempts by Intel to acquire Nvidia
would have the same impact.
Nvidia, for its part, seems con-
vinced that the ATI acquisition is great
news—that ATI is raising the white fl ag
of surrender. Nvidia has been fi ring on
all cylinders, and it has already beat ATI
to the punch with Direct3D 10 GPUs.
But Nvidia would be foolish to dismiss
this development out of hand. After all,
ATI is joining forces with a company
that took on mighty Intel and won—at
least for a while.The Great
Graphics
Shakedown
As AMD moves to buy out
ATI, the CPU war could
spread to your PCI-E slots
quickstart THE BEGINNING OF THE MAGAZINE, WHERE ARTICLES ARE SMALL
When you look at the graphics market in total, Intel is the undisputed king of the mountain;
Nvidia, surprisingly enough, takes third place behind ATI. But the outlook shifts dramatically
when you examine the market for discrete desktop GPUs—the parts that we as power users
care about most: Intel is out of the picture, and Nvidia beats ATI by just four percent.Desktop Graphics Market Share Q2 ‘06 Discrete Desktop Market Share Q2 ‘Market-share data courtesy Jon Peddie Research.Discrete Desktop Market Share Q2 ‘NVIDIA
52%
Desktop Graphics Market Share Q2 ‘NVIDIA
24%ATI
26%INTEL
35%VIA/S
10%SiS
5%ATI
48%
Will the merger between AMD and ATI leave Nvidia-philes out in the cold?