Fu­sion may be game-changer for AmD, ri­vals

Austin American-Statesman - - TECHMONDAY -

‘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.’

roger Kay

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.

KiRK LADeN­DORF

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