Intel Rival Gets Graphic

Advanced Micro Devices' proposed $5.4 billion acquisition of graphics processor and chipset maker ATI Technologies could open up new opportunities for systems builders, but questions remain about how the deal will affect Intel.

AMD says the move will allow it to offer systems builders a platform-centric model, an approach Intel has taken already with its Centrino mobile platform, Viiv media platform and forthcoming vPro business platform.

"Today there's really only one choice when it comes to an integrated solution--that's Intel, and we want to double that," says AMD spokesperson Bruce Shaw. "The result will be more choices in platforms and more competitive offerings for VARs, resellers and customers."

AMD plans to offer integrated microprocessor-graphics chip solutions in 2008.

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"One of the best things for systems builders to come out of this, and one of the things AMD is lacking, is an effective solution with integrated graphics," says Jim McGregor, principal analyst at Scottsdale, Ariz.-based market-research firm In-Stat. "Some of the markets they're trying to get into--like mobile and enterprise--are where Intel has been more efficient."

A choice of platforms could become more important for systems builders as growth opportunities in the PC market evolve, in part because of new form factors and innovative storage technologies.

"The vast majority of growth in the next decade will be in emerging markets and alternative form-factor PCs, such as ultramobile PCs," McGregor says. "With those, there's more focus on power and cost."

McGregor predicts that the deal marks the "end of the processor wars and the beginning of the platform wars" between the rival chip-makers.

Intel relies on ATI as a chipset supplier, and Nvidia, ATI's only other major rival, hasn't had as close ties with Intel in the past.

"I think the fallout remains to be seen, but how [this] will affect Intel is my biggest concern. Intel has been building some boards around the ATI chipset, and due to chipset shortages earlier in the year and late last year, it will be interesting to see how it affects Intel," says Doug Phillips, vice president of technical services at Seneca Data, a systems builder in North Syracuse, N.Y. "I can't imagine Intel will be using ATI chipsets anymore."

For its part, Intel has refused to comment publicly on the merger, except to point out that the deal is not yet final.

While Intel has altered its road map to reduce the number of ATI chipsets in its desktop motherboards, the company has scoffed at rumors that the move was related to AMD's impending purchase of ATI. Executives of Intel say the chipmaker will not make business decisions based on industry speculation.

In early August, Intel did ask the court overseeing its multiyear antitrust suit with AMD for permission to serve ATI with a subpoena to obtain documents that could clarify how the deal with AMD will affect Intel's ability to compete in the market.

In addition, the potential deal must meet with regulatory approval, which could present a few hurdles given that AMD's acquisition of ATI leaves only one dominant vendor in the high-end GPU market: Nvidia.

But already, some systems builders are feeling ripple effects of the impending agreement.

"ATI is a big partner of ours, and we're also the largest Intel partner in Canada," says Roch Brunet, product manager at Ciara Technology, a Montreal-based systems builder. "We don't deal at all with AMD; furthermore, ATI is a customer of ours."

ATI uses a high-performance cluster built by Ciara for the design of its video cards and chipsets--a cluster composed of 256 Intel Xeon processors.