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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HopJokey - Wednesday, August 2, 2006 - link
I beg to differ. It gets old after a while:(
Regs - Tuesday, August 1, 2006 - link
The distant future looks good. Though we yet to see any more green slides about new core technologies from AMD. It almost seems AMD will be making baby-steps for the next 5 or so years to try to compete with the performance Intel is now currently offering.For stock holders - lets just hope AMD can pull something off to gain revenue from other markets with the help of Dell and ATi. Their growing capital and recent acquisition need some definite profits to pay it off.
AnandThenMan - Tuesday, August 1, 2006 - link
I think it's fair to say the article has a very strong pro Intel and NVIDIA slant. For starters, it needs to be pointed out that ATI is actually the #2 graphic maker, not NVIDIA. Saying that NVIDIA is #1 in the desktop space is only part of the market, so why state it that way? Trying to make NVIDIA look good of course...And this:
This statement is just dumb. Unless the planet is destroyed by an asteroid, the deal is pretty much done. It is HIGHLY unlikely that the deal will not happen.
defter - Wednesday, August 2, 2006 - link
The desktop market is very important market since most of the profits are made in the high-end desktop market.For example ATI has much bigger overall marketshare than NVidia (27.6% vs 20.3%) and has lot of presense in other markets (consumer electronics, handhelds). Still, NVidia has bigger revenue, meaning that ASP of NVidia chips is much higher.
If you look at profits, the difference is even bigger, during the last quarter, NVidia made three times as much profit as ATI. Thus high-end desktop market is definitely very important.
Here are some GPU market share numbers for Q2:
http://www.xbitlabs.com/news/video/display/2006073...">http://www.xbitlabs.com/news/video/display/2006073...
PrinceGaz - Wednesday, August 2, 2006 - link
Most of the profits are not made in the high-end desktop market, in fact the very high end probably struggles just to break even due to the relatively tiny number of units shipped compared to development costs. Most of the money in discrete graphics is actually made in the low-end discrete graphics segment, cards like the 7300 and the X1300.
defter - Wednesday, August 2, 2006 - link
This is like saying: "most of the revenue is made on $100 CPUs instead of FX/Opteron parts..."The revenue can be higher on the low end of the market. But GPUs like 7300/X1300 are selling at $20 or less, profit margins for those can't very high. High-end chips like 7900/X1900 are selling for about $100 and the margins are much higher. (Compare the die size between 7900 and 7300, the difference isn't THAT big).
JarredWalton - Wednesday, August 2, 2006 - link
Hey, I'm a skeptic and you can blame me for the comment. Still, until the deal is well and truly done we have a proposed merger. Government interference, cold feet, whatever other setback you want... these things can and do happen. Do I think the deal *won't* happen? Nope - no more than I think the deal *will* happen. If you had asked me three months ago when I first heard the rumors, I think I would have been about 90% sure it wouldn't happen, so obviously I'm less skeptical now than before.As for NVIDIA and Intel slant, the NVIDIA perspective is their view. That doesn't mean it's correct, any more than the ATI, AMD, or Intel perspectives. However, ATI is #2 for the same reason Intel is #1: integrated graphics, specifically on laptops, and again we're talking about the underpowered, mediocre kind that will choke on Vista's Glass GUI. Wipe out all of the low-end GPUs, and NVIDIA has a clear lead in the market. Not in performance, necessarily, but in mindset and brand recognition? Definitely. We are an enthusiast website, and so we're looking at the stuff that moves the market forward, not just what suffices to run office apps.
AnandThenMan - Wednesday, August 2, 2006 - link
Being #1 in one market is not good enough anymore. NVIDIA NEEDS to be in the integrated graphics sector, the ultra thin mobile sector, the console market, the HD devices market etc. etc. This is where ATI is much more diverse than NVIDIA.
The article is about the implications of AMD/ATI and how it affects Intel, NVIDIA, and the whole industry. I understand what you are saying about the discreet enthusiest market, and naturally this is the most interesting and desirable segment we all like to talk about. But the merger is about much more than that. IMO, NVIDIA has to re-invent itself to be capable of taking on AMD/ATI. NVIDIA has come out and bragged about how they are not the "last man standing" but this is marketing spin at best. NVIDIA is on the record years ago as saying they want to "be where ever there is a pixel" but honestly, AMD/ATI is far better positioned to deliver this than NVIDIA IMO.
defter - Wednesday, August 2, 2006 - link
Care to elaborate? NVidia is doing fine financially, why it NEEDS to be strongly present on those sectors?
NVidia has been in the console market since 2001.
Calin - Wednesday, August 2, 2006 - link
NVidia IS in the integrated graphics sector - if you are referring to the "enthusiast" integrated graphic sector