AMD & ATI: The Acquisition from all Points of View
by Anand Lal Shimpi on August 1, 2006 10:26 PM EST- Posted in
- CPUs
NVIDIA’s Position
The mood around NVIDIA's offices the day of the AMD/ATI announcement was one of joy. There was no tone of worry or words of concern; you just got the feeling that every NVIDIA employee you talked to had a grin on their face that day. As far as NVIDIA is concerned, the move is ATI admitting defeat, coming to terms that it cannot compete with NVIDIA and needs to get out. Obviously, we are talking about ATI's competitor and there is a certain amount of PR going on, but let's take a closer look at the NVIDIA perspective.
The Graphics Market is Ours
NVIDIA basically feels ATI is ceding over control of the GPU market. They feel AMD is not going to be as interested in cut throat competition between itself and NVIDIA. If the deal goes through, NVIDIA will become the sole independent provider of GPUs to the industry.
To NVIDIA, this merger doesn't have anything to do with on-die GPUs, as AMD didn't need to buy a company to accomplish this. Intel has been manufacturing "good enough" integrated graphics chipsets for years, and it also tried to go down the path of an on-die GPU with the failed Timna project. For those of you that don't remember, Timna was going to be Intel's system on a chip complete with on-die graphics, designed to target the sub-$600 PC market. However just before Timna's release, the plug was pulled as the average selling prices of PCs were in free fall with no bottom in sight. The Timna team was then tasked to create an efficient mobile processor called Banias, which eventually led to the development of Intel's latest Core 2 processors.
From NVIDIA's standpoint, the acquisition also has nothing to do with gaining the ability to use more custom logic or being able to manufacture GPUs in house. For starters, both ATI and NVIDIA can produce their own custom logic driven GPUs if they put in the resources; AMD isn't the only one that can design custom logic. And from the manufacturing standpoint, since the fabs will always give preference to CPUs leaving the older fabs over manufacturing GPUs, there's not really any disadvantage to just manufacturing at a 3rd party foundry like TSMC.
What if Intel Makes GPUs?
From NVIDIA's perspective, last time it checked, none of its GPU designers got hired by Intel, so unless that changes NVIDIA will continue to be a dominant leader in the GPU business regardless of whether or not Intel decides to enter the discrete graphics market. While Intel can integrate very low end graphics cores with its chipsets, it's not as easy to do the same with mid range or high end graphics.
The AMD/ATI acquisition leaves NVIDIA as the only independent GPU/platform company that provides technology to both AMD and Intel. In the words of NVIDIA’s Dan Vivoli, Executive VP of Marketing, "we're comfortable competing with Intel in the GPU market. It's our home court". Vivoli added that "last I checked, none of our nForce engineers are part of the merger. We will have to continue to build leading MCP technology just like before".
Vivoli’s attitude towards the situation is quite pragmatic. Basing corporate direction over the potential threat of a company like Intel that has never been able to produce a successful high-performance GPU is a bit panicky. He added in closing, "likewise, nothing has changed on the Intel front. We will continue to have to innovate in order to offer better value than Intel. It's a world we are comfortable and familiar with."
Two Wrongs don't make a Right
The way the market currently stands is this: Intel and NVIDIA are the stronger marketing companies, and they have a history of better execution than their competitors. The acquisition is combining the two runners up in their respective industries; to expect the outcome to be this one tremendous power is wishful thinking at best.
NVIDIA has been building great technology for years now, and none of its engineers went to ATI/AMD, so what is fueling the belief that AMD/ATI can somehow build and execute this perfect chipset? Remember that AMD is not like Intel in that it is far more open with its partners, making NVIDIA's job of designing chipsets for AMD CPUs not as difficult as it is on the Intel side of things. AMD has publicly stated that the ATI acquisition will not change how it works with NVIDIA, so as long as that's true then NVIDIA should be able to continue to build world class products for AMD.
AMD Still Needs Us (and we need AMD)
Currently NVIDIA ships many more AMD chipsets than it does Intel chipsets, but that may begin to change with the release of Intel's Core 2 processors. In the future, competition for AMD platforms may end up resembling the desktop GPU market, with ATI and NVIDIA each taking about 50% of AMD chipset sales.
How do you like our Brands?
Not only does AMD still need NVIDIA, but Intel does too. NVIDIA has a number of very strong brands that you really can't get good competition to from anyone else: GeForce, nForce, Quadro and SLI are all things NVIDIA is well recognized for, and that will continue for the foreseeable future. Unless Intel can come out with its own high end graphics and multi-GPU offerings, it needs NVIDIA's support. NVIDIA also understands that dining with Intel is much like dining with the devil: the food may be great but you never know what else is cooking in the kitchen. NVIDIA will surely have a plan of its own to remain competitive in the worst case scenario, and partnering with Intel isn't in the cards.
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Zebo - Wednesday, August 2, 2006 - link
No worries...AMD runs a tight, efficient company that is accustomed to survivingthrough very hard times. AMD survived for a long time making chips that were cheap and almost as powerful as Intel's best. If they have to fall back to that business model to survive, they will. I personally loved those days of $40-$80 chips. But that's not realistic considering where AMD has been, their name and market presence currently, products on the table.. AMD is a mainstream player now with good reputation and large OEM's building thier boxes with them. They aint going anywhere.
poohbear - Wednesday, August 2, 2006 - link
so if the deal goes through, will the ATI brand name disappear? will we see AMD graphics cards instead of ATI graphics cards?Sunrise089 - Wednesday, August 2, 2006 - link
IMHO there would be no reason to abandon the second most valuable GPU name. When Ford bought Aston Marton they didn't suddenly rename the products things like Ford DB7.erwos - Wednesday, August 2, 2006 - link
Let me toss out a few random thoughts. I'm more of an economist than a businessman, but I took enough banking and finance to know enough to hurt myself.Almost all huge corporate mergers are not huge successes. Indeed, most of them tend to be failures unless the businesses are _very_ similar (gold mining company A buys out gold mining company B). My favorite example is Novell buying out SuSE and Ximian - everyone's doing operating systems, yet the best you can say was that it wasn't a complete failure. Certainly, the promised benefits haven't really emerged. Another good example is AOL and Time Warner.
The bad news here is that ATI and AMD are in two different sections of the industry, and that for the proposed benefits of this merger to work, they're going to have to integrate very tightly. To make things worse, the benefits of integration aren't all that clear. GPU on a CPU? Who's been asking for that? It has certain implications for the embedded market (think Geode and system on a chip applications), but they hardly needed to buy a company the size of ATI to accomplish that particular goal. And it couldn't be to hand ATI the better fabs, either - as Anand pointed out, AMD isn't going to have any extra fab space in the medium-term outlook.
My prediction: ATI-AMD will spend the next 9 months after the merger at _vastly_ decreased efficiency. Intel and nVidia will both be able to exploit this and take definitive leads in technology, at least for a while. In the long-term, ATI-AMD's dedication to high-end GPUs will fade, because the former-AMD executives running the company have absolutely no experience in the field. I am pessimistic, because, unfortunately, that is the historical truth.
Personally, I think that if GPU on a CPU becomes the prevailing way to go, nVidia will just buy out VIA or Transmeta. And they'll probably have just the same problems as ATI and AMD will have, too... But there's no reason to toss those problems on yourself until you have to, and there was no really compelling reason for AMD to buy ATI at this moment in time.
Kim Leo - Wednesday, August 2, 2006 - link
what are you talking about? ok its fine to comparte other situation like this, but AMD didnt buy ATI just for the "intergrated graphics in CPU" idea and even though Hector Ruiz dosn't have too much experience in this sector but ATI's CEO who will still be there does, and i don't think that AMD won't listen to what he has to say about it. I think this will be great, AMD and ATI will both benefit from this, they both get technologies that can be used in their own productserwos - Wednesday, August 2, 2006 - link
There aren't two CEOs. There's one, and his name is Hector Ruiz. At best, ATI's CEO will get pushed into director of the graphics division. More to the point, AMD's the much bigger company, and it's more likely their corporate culture is going to dominate ATI's. ATI's CEO's opinion will matter, but it's not going to sway AMD like it did/does ATI.If the plan isn't to integrate GPUs on CPUs, what other benefit was there to acquiring ATI? What techologies is ATI going to give AMD, and vica versa?
-Erwos
Sunrise089 - Wednesday, August 2, 2006 - link
Couldn't the desire to purchase a healthy company with a high profit margin in a fast growing industry be a benefit? I think everyone is too focused on integration in the short term. AMD had $$$, $$$ is there to spend or invest, and if the bean-counters at AMD think the ROI for buying ATI is higher than investing in a new fab or whatever than they make that decision.JarredWalton - Wednesday, August 2, 2006 - link
The major benefit seems to be AMD getting a company with a reasonable chipset business, and they can work that to create better business platforms, thus helping to penetrate the lucrative business sector. Except, penetrating the business sector is extremely difficult, especially the corporate world. "Buy Intel and Dell" is the standard decision, and even if Dell isn't picked, almost all businesses buy Intel systems. They did this all through the "NetBurst failure", so why would they change now that Intel has a good chip again (Core 2)?yacoub - Wednesday, August 2, 2006 - link
So will we see a reference cooler design on future ATI cards that is less noisy than the silly thing on the X1800/X1900 series? ;Pjones377 - Wednesday, August 2, 2006 - link
In Q106 the marketshare breakdown for all x86 chipsets were as follows....Intel 57%
VIA 15%
ATI 12%
Nvidia 9%
SiS 6%
http://www.xbitlabs.com/news/chipsets/display/2006...">http://www.xbitlabs.com/news/chipsets/display/2006...
Different breakdown for Intel and AMD platforms. Basically Nvidia has almost no share in the Intel platform market while ATI sells in both.