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.
Facebook
Twitter
RSS
61 Comments
View All Comments
leexgx - Wednesday, August 2, 2006 - link
i have only seen integrated graphics on nvidia based chip setsMost on board vdeio is VIA/s3 or sis integrated graphics (intel chip sets been intel video)
Calin - Thursday, August 3, 2006 - link
ATI RS480, RS482 and RS485 are in this game too (chipsets with integrated video). They were plagued by southbridge problems - slow USB performance mainly, and lack of features (like SATA 2). Whether or not this was detrimental to them, I don't know.(you can find mainboards with ATI integrated chipsets from MSI and ECS)
JarredWalton - Wednesday, August 2, 2006 - link
I agree with that. I think NVIDIA's comments are far more bravado than actual truth. However, if they can convince investors and consumers that they's "won the GPU war", it may not matter.My big problem with the deal: I don't know what AMD is doing spending $5.4 billon on ATI. Not that ATI is bad, but that's almost two new fabs. That's a lot of talented engineers making a lot of money for several years at least. I think ATI would be insane to not take the offer, but I feel AMD is almost equally insane to make the offer in the first place.
Furen - Wednesday, August 2, 2006 - link
AMD is borrowing the money to buy a viable, self-sufficient company. Convincing banks to let you borrow money for two fabs that will help you out 3+ years down the line is not very easy, especially considering that most people seem to think that AMD's growth is slowing down. Heck, having two extra fabs in 3 years could mean that AMD will just have lots of extra capacity with no use for it. Also, $5.4B for ATI is dirt cheap. Well, maybe not dirt cheap but undervalued considering that its portfolio rivals or surpasses nVidia's in many ways.AnandThenMan - Wednesday, August 2, 2006 - link
It is a big gamble for AMD, no doubt. A make-or-break deal in fact. But I would hope that the top brass has carefully considered the costs and the future markets/profits/advantages. With any high stakes game, the rewards are spectacular, but the cost of failing can mean you're history.
I suppose having new fabs does you little good if you can't offer a platform to the Dell's and HP's out there. There is no doubt in my mind about one thing, AMD is aiming straight at Intel's integrated platform approach.
Calin - Wednesday, August 2, 2006 - link
AMD is trying to get in the game of long-term selling. The corporate computers initiative they had some years ago (or maybe a year ago) was a first step - "freeze" a computer configuration, which you can then offer for a long time (like 3 years). If a computer breaks, move its hard drive in a new computer in the same line, and have everything working with GUARANTEED no problems.AMD did good in taking over the enthusiast market by storm - but this market has NO loyality whatsoever - people will upgrade everything they need and everything they don't in order to get the next big thing. Having a guaranteed revenue of mostly guaranteed value beats that (having an non-guaranteed revenue of big or small value, like it happens now).
AMD is much more ready to go in the corporate market - selling desktop computers, not just servers as it did until now.
Also, take into account that if AMD is behind in the "next big thing" (whatever this might be), it really does not have the money to play catchup. Intel has both the money and the market inertia to continue to be a big player when everything else is against its products. So, AMD is puting its future on a bet that the next big thing will be core-integrated graphics. If this works, they would reap huge benefits - just like they were able to with the Athlon64 on desktops/Opteron on servers (and somewhat Turion on mobiles). Before the Opteron days, AMD was largely inexistant in server space (the Athlon MP started to make a buzz, but they had little market share).
Will the money have been better spent on two fabs? AMD and ATI are both using external partners for creating chips, and this is more expensive only in the long run. In the short run, paying more for chips beats paying 3 billions to have your fab ready in three years. I figure the use of external fabs will continue long time in the future, and just the top of the line products will be built on AMD's fabs.
darkdemyze - Wednesday, August 2, 2006 - link
You say AMD doesn't have the money to play catch-up, and this is true that the whole deal is "a bet." But how else is AMD supposed to catch up? With C2D being released? Intel is going to have a huge impact on the performance sector by the end of the year - about the same time this merger is projected to be completed. What I mean by this is Intel is now ahead of the curve on AMD with this new architecture and according to their "new architecture every 2 years" roadmap, and Intel intends to not let the performance crown slip again as they did with Pentium4.
So what is AMD to do to keep up? As you said, place a bet on "the next big thing" and hope for the best. I'm not discreditting AMD for K8L, or Torrenza for that matter. But I think at the very least Torrenza will be greatly effected by this endeavor. Personally I feel this is a very positive aquisition.
Calin - Thursday, August 3, 2006 - link
K8L is just a few months from launch, and it might get AMD to performance parity with Intel (or exceed Core 2 Duo, or be left behind). I am hoping for a draw or a win for AMD.What AMD needs is a cash cow (as Athlon64 was until now). Will the ATI acquisition bring this to table? It could very well be so, and there are enough niches and market slices where this strategy is a winner.
Unfortunately, this might (or might not) reduce the competition in high-end video cards arena...
Nelsieus - Wednesday, August 2, 2006 - link
I strongly disagree with you.This, thus far, has been the best summarization coverage I've read on this issue.
PeteRoy - Tuesday, August 1, 2006 - link
AMD did not have it's own chipset with integrated graphics, audio and lan which is why it never made it to the offices where the big money is.