AMD announced its so-called Fusion program Wednesday (Oct. 25) upon the formal completion of its $5.4 billion acquisition of graphics and chip set designer ATI Technologies Inc. The merged company will ship versions of the combined processors for laptops, desktops, workstations, servers and consumer electronics devices geared for emerging markets.

The move could potentially give upstart AMD an edge over its much larger rival, particularly in a handful of generally small but potentially profitable sectors such as high-end consumer gaming machines, low-end consumer desktops and some technical computing environments. However, even with the ambitious merger AMD still trails Intel by far in terms of its overall revenue, profit and staff resources to address mainstream computing markets.

The Fusion chips aim to increase performance-per-Watt for applications such as 3D graphics, digital media and technical computing. In a press statement, AMD suggested the processors will leverage both its coherent HyperTransport interconnect as well as PCI Express to link to external co-processors.

The Fusion plan could give AMD a lead in delivering multi-core products using different kinds of processing blocks. Today, Intel and AMD are in a neck-and-neck battle to deliver CPUs with two and four x86 cores per chip.

"In this increasingly diverse x86 computing environment, simply adding more CPU cores to a baseline architecture will not be enough," said Phil Hester, AMD senior vice president and chief technology officer, in a prepared statement. "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," he added.

Intel has provided so-called north bridge chip sets for years that merge memory controllers and its own in-house designed graphics accelerators, but it has not delivered or publicly discussed plans for a merged CPU/graphics processor. Intel canceled plans for a low-end, all-in-one processor, dubbed Timna, several years ago. The x86 giant has generally had generally lackluster market success with integrated CPUs it delivered in the 1990s for mobile systems.

Intel's internally design graphics accelerators aim at generally low-end graphics capabilities for mainstream markets. Competitors such as Via Technologies have fielded merged CPU/graphics combinations for entry-level systems, chips that also have generally saw little market adoption.

AMD could take a different tack by using in its Fusion products ATI's broader range of high-end graphics accelerator cores. Such combined chips could attack high-end PCs for consumer gaming or technical computing, machines which typically use multiple graphics adapter cards today.

Intel would not be likely to respond immediately to the AMD moves. The larger rival is in the middle of a cost cutting phase, pairing employees back from 102,000 to about 92,000 over the next year. Intel said it will not cut products or programs in its core computing markets due to the cutbacks. However, in this climate, Intel would be unlikely to start new initiatives for relatively narrow markets such as the AMD's Fusion chips are likely to address.