AMD to put ATI graphics in its chips

AMD's planned acquisition of graphics chip specialist ATI should pave the way for more capable processors

Processor maker AMD plans to acquire graphics and chipset firm ATI in a move that will help it compete more effectively with rival Intel and also pave the way for new products combining technology from both companies. However, AMD risks alienating key partners such as Nvidia, which makes AMD chipsets but whose chief business is graphics processors.

The deal, which is subject to ATI shareholder approval, will see AMD buy the Canada-based chipmaker for $5.4 billion and is expected to be completed before the end of 2006.

AMD's plan is to integrate its processor technology with ATI's graphics capabilities, but the acquisition will also enable it to build platform-level solutions for system builders in order to compete better with Intel in the desktop PC market.

"We see the biggest opportunity for growth in the mobile and commercial space, as we have already had some success in servers. Customers said we had to play a bigger role in the ecosystem, we had to be able to control chipsets and platforms," said AMD chief executive Hector Ruiz.

Chief operating officer Dirk Meyer said the company had found it difficult to bring to market a platform when it involved working with a large number of partners.

"We will be able to deliver a better turnkey solution to customers with ATI, " he said. However, he added that AMD will continue to keep its platform open. "Intel requires the use of Intel chipsets and Intel NICs in its platform. We’re not going to do that," he said.

However, AMD may lose favour with Nvidia, which makes chipsets for AMD-based systems and whose chief rival is ATI. In a statement, Nvidia said: “Today’s news about the acquisition of ATI by AMD is a positive development for Nvidia. We are now the only graphics processor and core logic company that supports both Intel and AMD processors. We will continue to execute on our strategy, which is to develop industry-changing GPU and platform technologies."

For its future plans, AMD said it is looking to move beyond current system configurations. Dave Orton, chief executive of ATI, said that his firm will bring new skills and innovation to the company. "AMD has great CPUs, we have great GPUs (graphics processor units). The next phase of innovation is to take our two great products and integrate them," he said.

Meyer said that there was an opportunity to integrate the CPU and GPU on a single piece of silicon for some market segments, but he expected the distinction between these to eventually disappear.

"Right now, we have general-purpose CPUs and special purpose processors such as GPUs, but over time, we see the need to integrate these together. If you look back fifteen years, the FPU (floating point unit) was separate, but now it is part of the CPU," said Meyer.