AMD buys imaging chip maker
AMD (Advanced Micro Devices) announced a purchase today that will strengthen its competitive position versus rival Intel in the PC controller industry. It has agreed to buy Canadian firm ATI, the #1 maker of graphics accelerator chips, for $5.4 billion. ATI also makes other chip sets for such things as cell phones, portable game players, and digital TVs.
The figuring is that the AHT will allow AMD to meet one of Intel's biggest advantages. Current Intel microprocessors have built in graphics processors. These are used to speed up the ability to refresh the video screen on a computer rapidly, something needed more and more as video clips, movies, and complex games get ever more popular, and as large screens proliferate. Intel's built-in graphics capability is good enough for average users (it commands some 39% of the market), while the ATI solution (29%) offers a faster dedicated chip set.
According to a Wall Street Journal article ("AMD to Buy ATI", 6/24/06) quotes one analyst as saying:
[Intel's] broad product line has hurt AMD, too. In markets such as laptop computers, controlling both chip sets and microprocessors has helped Intel offer such benefits as lower power usage. The combination also helps Intel woo big corporate personal-computer buyers, which want guarantees chip sets won't change for long periods, to hold down maintenance costs. AMD, relying on other component vendors, hasn't been able to guarantee such stability
One problem that AMD has to deal with is Nvidia, the #2 independent graphic chip maker (19% market share). AMD now works closely with Nvidia on some of its product lines. Now it will become a competitor, which might lead to a tricky transition. But the problems are greater for Nvidia, who has one less major customer. The may be driven into the arms of Intel.
This is a big gamble for AMD, whose stock is done by over 50% this year and already is losing money thanks to a price war with Intel. But with sinking profits and Intel's big war chest, that gamble may be the only chance of keeping in the game.
