AMD +ATI = end of Intel?

Hmmm… Another merger. This one is AMD eats up ATI for 5.4 Billion US dollars. That’s great for the company. AMD enthusiasts have always been the gamers. So with it’s takeover of ATI in 3 months, what are it’s implications?

Intel seems to be lagging behind currently with good leadership and hefty discounts on the midrange products. They do have a good market for the new high end chips released including Montecito, but then it is way too costly even for the current gaming enthusiasts. They does seem to be a course correction course with the recent slash in chip costs, but will it retail it's leadership? Or loose it's share gradually? (By a huge 30 to 50 %) What are it’s future plans? Any acquisitions?

One acquisition I heard of last year was Transmeta (Which they had also funded initially) The loss making chip manufacturer had a small market with it’s Transmeta chips earlier on laptops and specific electronic devices. Transmeta was a little famous as it was low powered and low heat generating (Much lesser than AMD’s). But then, the company had lot’s of plans which never worked out.

And as Intel released the Centrino processors, the company lost it’s foothold in the market and slipped, badly from an already red to bankrupt position. What can Intel gain from a loss making company? Yes, lots. Transmeta was solely focused on low cost, low power, low heat generating chips. Combine that with Intel’s powerful chips and you have a winning combination. If they get their products right. Or else, it can only get better for AMD.

In comparison, AMD’s takeover of ATI is a winning proposition. AMD is focused solely on the processor market. And ATI in the display cards segment. The portfolio does not conflict in any way, but can only add value to each other. We do know that the current market for video cards is limited - to ATI, Nvidia or Matrox. Now Matrox is very useful in the dual monitors segment. Besides the graphics compared to ATI or Nvidia still lacks a lot of features. (Pixelshaders is not so well defined) So a gamer, animator, designer, photoshop professional and all related animation fields have very few options. An Nvidia or an ATI. If he were to purchase an Nvidia card, well, so much for it, but there’s no loss. But if he were to purchase an ATI video card, then you know AMD is heads up over Intel. Because they would still generate revenue from a sister concern.

Supposing you were to buy an Intel chip, you probably would be happy with the system, but as a gamer you would be stuck for better resolution. So any animator, gamer would still go for either an ATI or an Nvidia card. Even if 40 % of Intel buyers opt for an ATI card, they are still paying for AMD hardware.

Now check Intel’s graphics. It uses an integrated series of chips called the integrated chip accelerators. (810,815, 845, 865 …) Good for beginners, but still basic for good graphics. Will they improve the card series? I dunno, but I bet they will - atleast to survive. Intel gave us a new technology - the PCI Express (the latest one) which is much faster for processing those images than even AGP or PCI types. ATI has already adopted the technology( including crosswire series) , so they would not loose out.

Thoughts about this change

Intel, increasingly under pressure would need to ramp up it’s entire portfolio immediately. Or play catch up soon. Will they or can they do it? Their philosophy has been only in doubling the transistors every year, but without some solid technology backup, they can only take the alternate route - Provide better display cards on the mobo. That would be cheaper than taking over Nvidia.

Margins would definitely be under pressure for Intel. AMD is a low cost manufacturer and does not focus solely on profits, but on sales. Intel is focused on increasing it’s ROI every year. But both have adequate cash positions, Intel having a huge reserve.

Chipset mobo manufacturers were already integrating either an Nvidia or ATI in the motherboards but now, I guess AMD might, just might lay down some rules on using ATI only. That might leave Nvidia as a subset for Intel. It might force them to hit back against AMD, so I guess that option is out.

What Intel can do?

a. Raise objections to the regulatory board, which I think they won't at this stage. By taking over ATI, AMD is capturing 10 % of the market by the merger alone. How will that happen?
Let’s not forget that ATI has it’s own divisions focused on mobo manufacturing. And the integrated chips are what counts in the mobo market. If they offer a cheaper package to the manufacturers, I am sure they would just opt for the AMD+ATI combo without much ado. Right now, (Check Tigerdirect.com) there is a combination package of a Gigabyte motherboard + ATI at less than half the market cost for an Intel. That is you buy the mobo, you get the display card free.

b. Intel should plan its own series of original Intel mobos and include extreme graphics. 3D technology has long since been pending especially since movies were released as far back in the 80s. Though a part of it can depend on the monitors, I think the major component would still be the video card. Can Intel pull out this trick from their sleeve?

c. Earlier they resorted to target sales, ie., display counters wee bought outright by the biggest assemblers (Dell) for display of only Intel products. This is no longer a route as they have been slapped with huge legal suits. But then they just might improve on product bundling for the motherboards., the free software on offer might just increase.

But can this sustain their momentum?