AMD Acquires ATI.

AMD released an official press statement declaring it's intentions to purchase ATI, a deal worth over $5.4 billion dollars. The deal still must be approved by the U.S. government regulators, although it is expected to pass without a hitch. The deal has some AMD fans worried that nVidia will discontinue or neglect to produce their popular nForce chipsets for the Athlon 64s CPU line. While this may or may not be the case, there are also several benefits that will come from the purchase.

The first thing to come to mind is that with AMD and ATI combined, AMD can finally produce a complete OEM package, including a CPU, motherboard + chipset, integrated graphics, sound, and ethernet. Until now, AMD has only made a limited number of chipsets, relying on ATI, nVidia, and VIA to produce the majority of the chipsets for their processors. With the ability to package a complete set of components, AMD should be able to provide competition to Intel in that area for the first time.

It's no secret that ATI has recently been on the losing side of the graphics processing war. nVidia has consistently produced superior performing products over the last few years. On the otherhand, AMD has been winning the CPU war for quite awhile, until Intel recently slashed prices and introduced the Core 2 Duo. This purchase may prove to be the key to AMD's survival, since it not only gives them the motherboard/chipset capability, but it also allows them to improve ATI's video card development using AMD's advanced fabrication processes along with their partnership with IBM in fabrication research.

One thing that may be lost in the mix is the current level of competition we're used to. The sides seem to be dividing to an Intel + nVidia partnership vs an AMD + ATI purchase. While this may actually help competition, it also has the ability to stifle innovation. If nVidia stops producing chipsets for AMD, and ATI stops producing chipsets for Intel, the only motivation for either company to produce better chipsets than the other will be tied directly to the CPU's performance. VIA will most likely suffer from this, as ATI will undoubtedly be the standard chipsets for AMD. Not that VIA will not be able to develop chipsets in the future, it's just that if ATI chipsets become the stock, default chipsets, it makes it that much more difficult to offer a low end VIA chipset to anyone else but budget PC builders.

With Intel pulling ahead of AMD, it's no surprise that AMD is trying to position itself in order to step up the competition. Only time will tell if this deal will be a success and increase innovation in both the CPU and GPU market, or turn into industry stifling mistake the solidifies Intel's growing lead. Until then we'll have some interesting things see.

Official AMD Press Release.

UPDATE: From nVidia: "Today’s news about the acquisition of ATI by AMD is a positive development for NVIDIA. We are now the only graphics processor and core logic company that supports both Intel and AMD processors. We will continue to execute on our strategy, which is to develop industry-changing GPU and platform technologies, extend the use of the GPU into new applications, and expand its reach into all computing devices - from PCs to servers to phones."