Short-Term Impact of the Merger Expected to Be Limited
Although AMD seeks to extend its reach into the CE segment by means of the ATI acquisition, challenges still abound. ATI has secured a leading position in the global HDTV (High-Definition Television) segment, especially regarding the US ATSC (Advanced Television Systems Committee) standard; ATI has also gained design wins with numerous television makers, including Japanese JVC (Victor Company of Japan) and Sony. Nevertheless, ATI still faces stiff competition from providers with a strong footing in the DTV industry. Genesis, Pixelworks, Trident, and even Taiwanese MediaTek are all significant competitors in this field.
In the handheld segment, AMD is still suffering from low shipment share despite having obtained orders from Nokia and Motorola. At present, graphics chipset designs for many handheld devices have already been integrated, and major suppliers include TI (Texas Instruments) and Broadcom. Also, the necessity of 3D graphics capability for mobile handheld devices still hinges on the timetable of 3G or 3.5G service popularization.
Therefore, in the short run, AMD and ATI's merger will have a limited effect, especially on the crossover into emerging segments; the deal is expected to benefit the new company mainly in the computing segment. In the long run, AMD is expected to benefit from the deal in its platform planning and Torrenza development.
Original Partnerships to Face Challenges
Nvidia, which started collaboration with AMD since crossing over into the chipset segment from the graphics chip segment in 2003, is expected to be impacted by the merger between AMD and ATI. Nvidia's collaboration with AMD has been fruitful; it had a share of more than 10% of the global motherboard chipset market in the second quarter of 2006. Nvidia was already planning a lower-priced product line, and AMD's acquisition of ATI probably will influence the future collaboration between Nvidia and AMD, especially concerning patent licensing and certain technologies.
ATI has been closely collaborating with Intel. In the motherboard segment, ATI's shipment is stil mainlyl coupled with Intel CPU's. Moreover, as Nvidia unveiled SLI (Scalable Link Interface) technology and threatened Intel's integrated chip sales in the high-end market, Intel reached an agreement with ATI to use its CrossFire technology. Also, facing the insufficient capacity of value-line chipsets in the second half of 2005, Intel adopted ATI chipsets for its own-branded motherboards.
It remains to be seen if the two respective partnerships will be broken following the merger between AMD and ATI. Even though current cross-licensing will not be terminated for the time being, it is likely that future cross-licensing of new products and technologies will take more time.
Taiwanese chipset makers are expected to have a hard time coping with the changes, especially regarding AMD platforms, because Taiwanese makers' niche is also in the mature value-line market segment. With Intel and Nvidia each rolling out value-line products and ATI benefiting from AMD resources, it can be foreseen that the competition will become fiercer among chipset makers.
Limited Impact on the Motherboard Industry
There are three reason why AMD's acquisition of ATI is expected to have limited impact on motherboard makers. First of all, product mixes offered by both sides have already been adopted by motherboard makers, and hardware designs of motherboard products will not be affected by the merger.
Secondly, a motherboard maker's choice of CPU and chipset specifications mainly depends on customer feedback. Especially in the own-branded segment, motherboard makers usually adjust their product portfolios according to actual sales in the market. Hence, the AMD-ATI deal will not boost product adoption immediately. Nevertheless, it is likely that the better connection among CPU, GPU, and chipsets achieved by the merger will find favor with consumers and ultimately encourage motherboard makers to adopt such products.
Lastly, it is highly unlikely for AMD to pursue Intel's "package" mode of business - that is, selling CPUs bundled with chipsets, or even CPUs bundled with chipsets and motherboards in some regions - for that is exactly why AMD accused Intel of unfair trading practices. Therefore it is expected that, after the merger, there will be no significant changes in product design or sales for motherboard makers or other clients.