The acquisition of ATI Technologies is, perhaps, an admission by Advanced Micro Devices that the lack of a graphics engine left a gaping hole in its product offerings for motherboard manufacturers. By buying ATI, AMD will now be in a position to deliver desktop and portable platform solutions that compete more directly with Intel's Viiv consumer platform; high-performance gaming platforms; and the mainstream business PC platforms.
Although AMD has done some motherboard chip set development, it left the volume chip set business mostly to the Asian silicon suppliers. ATI, however, has motherboard chip sets for both AMD and Intel processors. This will bolster AMD's position vs. Intel, which designs and manufactures its own chip set solutions. It will also give AMD the ability to offer bundled pricing and to manufacture its own motherboards for the OEM market.
Indeed, the lack of control over the chip set may have been a big motive for the acquisition. By controlling the CPU, the chip set and the graphics engine, AMD can now offer a close-to-complete motherboard solution--one that may give it some pricing flexibility when negotiating with the motherboard makers.
In the handheld space, the ATI mobile media processors open a new market segment to AMD, which has not had much presence in the cellular phone and media player markets. AMD's internal wafer fabrication capability can be a major asset in this very cost-sensitive sector. Shifting production from commercial foundries to either internal fabrication facilities or to the foundries with which AMD already contracts could potentially lower the manufacturing cost of the chips, delivering a more competitively priced solution than ATI could have achieved on its own.
By Dave Bursky (email@example.com), semiconductors editor for EE Times