AMD Completes ATI Buy, Unveils ‘Fusion’ Initiative

By Jessica Davis and Suzanne Deffree -- Electronic News, 10/25/2006

AMD today announced the completion of its approximately $5.4 billion acquisition of ATI Technologies Inc., a deal that sees the second-place MPU maker gain the industry’s second-place graphics chipmaker.

AMD also announced Fusion, a technology initative that will create a new breed of x86 processors that integrate the central processing unit (CPU) and the graphics processing unit (GPU) at the silicon level. AMD first hinted at such an integration direction in an interview with Electronic News in May, well before the announcement of the ATI deal in July. These CPU and GPU cores will remain intact as seperate logical blocks on the silicon, an AMD executive confirmed today.

Fusion processors will debut in the late 2008 to early 2009 time frame, said Hal Speed, a marketing architect with AMD. AMD's roadmap calls for a move to 45 nanometer process technology in 2008.

"Our transition to 45 nanometers is aligned to our transition to integrated CPU/GPU Fusion processors," he said.

Speed said he anticipates AMD will continue to offer discrete CPU-only processors because there are some applications that don't require the high performance graphics that the integrated GPU will provide.  In addition, Speed said, he anticipates that some multi-core processors will include different ratios of CPUs to GPUs, depending upon the application.

Speed cautioned that gamers will likely want to continue with a discrete GPU for quite some time because that system approach would still provide the highest performance for their needs.

AMD said it intends to design Fusion processors to provide step-function increases in performance-per-watt relative to today’s CPU-only architectures, while providing a solid platform for 3D graphics, digital media and high-performance computing.

AMD-powered Fusion platforms will continue to fully support high-end discrete graphics, physics accelerators, and other PCI Express-based solutions, the company said.

“With the anticipated launch of Windows Vista, robust 3D graphics, digital media and device convergence are driving the need for greater performance, graphics capabilities, and battery life,” said Phil Hester, AMD senior VP and CTO, in a statement this morning. “In this increasingly diverse x86 computing environment, simply adding more CPU cores to a baseline architecture will not be enough. As x86 scales from palmtops to petaFLOPS, modular processor designs leveraging both CPU and GPU compute capabilities will be essential in meeting the requirements of computing in 2008 and beyond.”

AMD expects to use Fusion processors in all computing categories, including laptops, desktops, workstations and servers.

AMD hinted at earlier platforms before the delivery of Fusion, but withheld specifics, only saying that it plans to deliver a range of integrated platforms in 2007 to serve markets including commercial clients; mobile computing; and gaming and media computing. AMD also noted opportunity in the growing consumer electronics market, saying that it intends to “leverage ATI’s strength in the consumer market by pursuing new opportunities to invest in the consumer electronics and high-end discrete graphics markets.”

Some analysts were less than impressed by the Fusion plans.

"Intel already supplies integrated graphics (integrated into the chipset), and we therefore do not believe AMD's intention to integrate offers any particular advantage, except that the graphics capabilities acquired through the ATI acquisition are better than Intel has in house," said Chris Caso and Elizabeth Pate, analysts with FBR Research. "Our checks indicate that Intel is not standing still and has already formed a new graphics design group intended to focus on higher-end graphics, including discrete solutions."

Analysts generally viewed the merger completion as positive but raised continuing concerns about some areas of execution.

"We are encouraged by the possibilities of product development and platformization that the merger of the AMD and ATI enable, however our concerns regarding the ATI integration and time line for the synergies to accrue remainl" said Tim Luke, a managing director at Lehman Brothers. "Overall, we consider theme of incremental share gains notably with OEMs remains in tact but we recognize that execution on the product ramp and on margin progress remains key."

The closed acquisition puts AMD’s headcount at about 15,000, with employees located in co-located in Taipei, Taiwan, and Shanghai, China, in addition to existing AMD Austin and Toronto locations.

AMD’s prime rival Intel has been rumored to be looking into the acquisition of ATI’s rival Nvidia, but no firm acquisition plans have been announced to date. If such a deal were to happen, the top MPU and graphic chipmaker would be combined, giving AMD a run for its money.

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