ATI could very well prove to be a potent weapon for AMD in clash with Intel.

This article appears in the October 06 issue of PC Advisor, which is available now in all good newsagents.

The battle for supremacy in the processor-manufacturing market has reached a critical phase, with AMD announcing its plan to acquire Canadian graphic card maker ATI. The imminent $5.4bn (about £2.9bn) purchase is the most vital element in AMD’s concerted campaign to dethrone Intel.

The acquisition, which is subject to shareholder and regulatory approvals, would turn AMD into one of the world’s largest providers of graphics chips. “You won’t see it tomorrow, but the merger will potentially put AMD on a more equal footing with Intel,” said Michelle Warren, an analyst with Evans Research.

Growth spurt

For AMD, the acquisition would round out its graphics-processing unit portfolio, said Eddie Chan, lead analyst at research firm IDC. "ATI has a strong product portfolio that covers components for such offerings as mobile phones, wireless products, digital TV and high-definition TV." On the other side of that coin, AMD allows ATI to hitch a ride on the integrated chip bandwagon.

Integrated thinking
Discrete graphics components have been suffering over the years with the move to integrated chips, Chan said. “A tie-up with AMD allows ATI to move towards integrated solutions or the so-called system-on-a-chip platform.”

Adrian Hartog, senior vice-president for consumer products at ATI, characterised the alliance as a growth opportunity for both companies.

R&D lead

It is expected that the merge will harness ATI’s strong R&D (research and development) track record. In a list of Canada’s top 10 R&D spenders, released late last year, ATI was at number five.

ATI spent $389.1m (£208.8m) in R&D in 2004, an increase of 18.3 percent. The company turns major products out every 12-18 months. “Bringing these two companies together will allow us to transcend what we have accomplished as individual businesses,” said Hector Ruiz, chairman and CEO of AMD.

AMD has revealed plans for a highly efficient dual-core laptop processor, for release in the second half of 2007.

Servers and gamers

AMD enjoys considerable strength in the server and consumer computing industry, while ATI is considered a leader in the gaming arena. Warren said recent years have seen these disparate markets move closer to each other.

For instance, ATI’s Shader Model 3.0, which allows complex shading and more realistic image rendering, is finding traction with companies that are heavy CAD (computer-aided design) users. Hartog said the purchase of ATI will involve “some changes”, but he downplayed the chance of redundancies from the company’s more than 3,000 employees. Warren said the alliance “steps up” ATI’s competition with rival nVidia. AMD turns to nVidia for graphics components, as well. “Depending on the contract, it is possible that nVidia’s access to AMD chips will be limited.” This could open doors for nVidia to search for other options and possibly talk with Intel.