Fusion may be game-changer for AmD, rivals
‘Fusion will be a big leg up for (AMD). This gives them a good argument against their rivals. They will have better graphics than Intel and better computer processing than Nvidia.’
Analyst, Endpoint Technologies
The word “fusion” conjures up images of New Age music, food or maybe nuclear warheads. But for Advanced Micro Devices Inc., it’s been a grand quest worthy of Indiana Jones.
The story goes back four years, when the chipmaker spent a fortune — $5.4 billion — to buy a Canadian company, ATI Technologies Inc., a promising maker of graphics chips.
And when AMD executives reached for words to describe the magic of the deal, one of the first things they uttered was, you guessed it, fusion.
Rather than bombs, music or food, AMD’s version of Fusion was merging a powerful graphics processor and a solid computer processor on the same piece of silicon.
If you could do that and do it well, then maybe you could change the game in personal computing.
AMD describes it as “immersion computing,” a dramatic step forward in multimedia processing, which would deliver startling new graphics and photographic images, high-definition video and even image recognition.
The past four years have been a mixed bag of ups and downs for AMD.
On the plus side, AMD reorganized itself, sold off its money-hungry manufacturing operations, reduced its debt load and won a historic antitrust settlement from archrival Intel Corp.
On the negative side, Intel has made major strides in processor design and manufacturing technology that enable it to make and sell processors that surpass AMD on both performance and power consumption. Intel is pushing ahead with its own version of melding graphics with the main computer processor.
Fusion is one of AMD’s bets to get back on a more even performance footing, or even to gain an edge.
So given the stakes involved, some investment analysts were concerned when AMD CEO Dirk Meyer told them this month that his company was changing the batting order on Fusion. The first chip would be Ontario, a low-power chip aimed at lowpower netbooks and other small computers.
Ontario will be in production late this year, and the chips will begin showing up in computers early in 2011.
But Llano, a mainstream chip aimed at both desktop and laptop computers, is being delayed “a couple of months” while GlobalFoundries Inc., AMD’s manufacturing partner, sorts out some issues with its next-generation manufacturing process technology.
Llano will still enter production in the first half of next year, Meyer said.
“It is disappointing,” said Craig Berger, an analyst with FBR Capital Markets who thinks Ontario is not the high-impact chip that analysts hoped AMD would introduce first.
“Intel is putting out phenomenal products right now. They are firing on all cylinders,” he said. “If you want to keep pace, you need to be in the ballpark on (manufacturing) process technology, which AMD is not.”
Berger also is unhappy that AMD spent about $40 million more running its business in the latest quarter than it originally estimated.
Playing from behind is not an unusual position for AMD. Intel has always had more money, more engineers, more advanced manufacturing and more market clout. AMD has countered with design innovations and its willingness to accommodate the needs of key customers.
If AMD can fix its manufacturing problems and get its Fusion parts out in a timely way, it can get back in the game.
“Fusion will be a big leg up for them,” said analyst Roger Kay with Endpoint Technologies Associates. “This gives them a good argument
Continued from B against their rivals. They will have better graphics than Intel and better computer processing than Nvidia.”
Intel is the world’s leading supplier of computer graphics chips, but it concentrates on lower-performance products that supplement its processors. In the PC performance graphics category, AMD has gained ground on kingpin Nvidia Corp.
Jon Peddie, a graphics technology market analyst, says Fusion will be worth AMD’s four-year wait.
“It is a genuine inflection point in the PC market and game changing for AMD and the industry,” he said.
Berger is a little more muted. “They have a real shot at becoming good again, but it is going to require execution,” he said.