AMD/ATI merger is one of equal problems

AMD/ATI merger is one of equal problems

Summary: Advanced Micro Devices bid to acquire Canadian based ATI Technologies is a risky strategy because both companies are facing the same issue: big, pricey, client-side chips in PCs and other devices are becoming less important, and less profitable than server-side chips.These two companies make very large, complex chips.

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TOPICS: Processors
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Advanced Micro Devices bid to acquire Canadian based ATI Technologies is a risky strategy because both companies are facing the same issue: big, pricey, client-side chips in PCs and other devices are becoming less important, and less profitable than server-side chips.

These two companies make very large, complex chips. Graphics processors typically have transistor counts as numerous as those of general purpose microprocessors. Together, they provide a solid user experience with tremendous graphics, sound;  plus they run large operating systems and very large applications--all on a PC or laptop.

But with technologies such as those from Citrix--that can mimic the user interface of a PC-based application running from a server, you don't need that kind of computing power on the client side. You just need a few chips that can quickly process graphics and sound data, and no need for that much general purpose processing because the applications are being run through mighty server processors.

Wyse for example, maker of thin computing systems, has demonstrated an inexpensive six-core ARM processor with graphics, video, sound capabilities capable of handling 32-video streams simultaneously. A chip like that can be embedded inside a monitor, a keyboard, anywhere.

And with thin computing systems, you don't need local hard drives, DRAM or Flash memory. It becomes a highly sophisticated computing platform with very inexpensive clients.

This is the trend in today's world, where there is less and less need for a big general purpose X86  microprocessor plus a highly sophisticated graphics co-processor, sitting inside a PC. Wyse's solution is much,  cheaper and provides the same user experience as a fully loaded Windows XP PC. The applications are run on a server and the client device just needs to render the graphics, video, and sound.

And as we move ever closer to an always-connected world through ubiquitous wired and wireless connections, the thin computing model that Wyse and others advocate, becomes very practical and very cost effective. In addition, a thin computing architecture provides far more protection against viruses, spyware, and other nastyware, because the user experience is completely controlled from a central location.

Intel has already begun moving away from the client side of devices with its recent sale of part of its communications chip business. Intel knows that the money is in the server, that's the sweet spot.

And yes, the PC market won't change overnight into a thin computing model but that is definitely where the world is heading, especially in fast growing developing regions. There are still plenty of legs in the notebook microprocessor segment of the market--the fastest growing. AMD, however, has a hole to fill in the mobile segment, and that is provided by Transmeta and its low-power consuming chips for notebooks, which are resold by AMD.

Intel is strong in mobile microprocessors because it took on the Transmeta low-power challenge more than six years ago and shifted its development to focus on mobile microprocessors first--then migrate the designs for desktops. AMD still develops microprocessors for the desktop first, then mobile second.

The linkup with ATI will give AMD a short term boost because it will have greater access to customers of cell phones, smart phones, games consoles such as Xbox,  and other digital gadgets that use graphics chips from ATI.

But the long term trend isn't to marry X86 microprocessors with graphics processors, because that has been happening for many years as AMD and Intel microprocessors add graphics functions. The long term trend is for simpler, more specialsed chips.

In thin computing platforms the PC client just needs to be good at handeling images and sound. That can be done with inexpensive, high performance chips specially designed for such tasks, as in games consoles.

And as for Nvidia, ATI's largest competitor, staying independent might be the best strategy. Nvidia can move into the thin computing markets without the need for a microprocessor partner precisely because client-side thin computing doesn't require an X86 processor. It can be done with one of many designs such as ARM that are easily licensed and specifically designed for use in multimedia applications.

Also, Nvidia can focus on business opportunities while AMD and ATI are distracted by the merger. In the graphics chip business, there have been many problems when rivals missed a new upgrade cycle, in some cases companies never recovered.

The short term risk for the AMD/ATI merger is distraction while in the middle of a serious competitive fight with Intel, and Nvidia. The long term risk is that it doesn't do much to address the inexorable trend towards thin computing, and the disruptive changes to current business models.

There seems little point to a merger between companies that share the same challenges but neither has a clear solution.

Topic: Processors

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19 comments
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  • Maybe its for the fabs

    Designing chips and manufacturing chips are two different things. I'm pretty sure that ATI doesn't use the latest cutting edge fabs - 65nm, and investing in that technology will cost an arm and a leg. As GPUs get beefier, they get HOTTER and ATI has been shipping graphics cards with cooling fans for awhile now. Maybe if AMD could help make the chips run cooler, you wouldn't need cooling fans.

    As for AMD, getting ATI means they can keep their fabs running at peak capacity - churning out GPUs. Any kind of chip is "core business" for AMD, so this purchase follows their corporate needs.
    Roger Ramjet
    • I totally agree

      It costs AMD a bunch of money to stop a fab, and it would cost way too much money for ATI to invest in 65nm fabs, that way both of them win.
      SantiagoCrespo
    • ATI is fabless...

      ATI doesn't run any fabs, but you make a fair point about making sure that *AMD's* fabs can run at full capacity. When you plonk down $3bn for a fab, you need to make sure it is running at 99 per cent capacity otherwise it starts to hurt.
      foremski
  • WHAT??????? You Are A Tad Bit Off

    Thin Client was done and failed years ago. WYSE is trying to bring it back to life maybe this time will work in a enterprise envirment where companys have powerful servers. But the Big Fast Processors/Graphics processors are always going to have a market Gamers etc. The rich media experience cannot be acheived via thin client. I lot of people are not a fan of having information stored on a web server and not there locally.
    MLHACK
    • tad bit off

      I agree. The thin client seems to be more geared towards a business application. I intend to implement thin at the office, but can't see it happening at home. I see the merger as an opportunity to further expand the integration of the processor and video into one mighty unit.
      aroberts9
    • At the office

      Thin clients for business. Thick clients for home.

      I have yet to see an application that really needs the kind of "Super Gamer" PC that is being sold today.

      As long as M.S. has 90% of the office application market, and Terminal Server is cheap, there will be a market for Thin Clients at the office. Central management, on place to load the companies macros, one place to load the weekly security patch, one place to back up the user files, etc. etc.

      Thin clients did not fail because there was some basic flaw in the argument for them, they failed because there was no point in buying a $500 thin client when you could buy a $600 "White Box" PC.
      jmusto9
  • Strange Bedfellows

    I not sure what AMD is considering with the acquisition of ATI. AMD has always embraced Nvidia aggressively. I like ATI and except for a few cards it has been my mainstay. I wonder what kind of signal this is giving Nvidia or are they next?
    msdead
  • Thin computing not dead

    Far from failing long ago, thin client computing is alive and well in the customer service industry. AT&T, one of the largest providers in the US uses a thin client for its customer database. When you call a customer service reps in their land line, cellular, or network provider divisions the customer service rep is accessing your confidential account information through a thin client.

    While thin computing may be considered too insecure by most home users, many businesses have found that it provides much better security by not only storing confidential information on a single secure internal server, but also by protecting confidential information for being copied or duplicated by employees.

    If the AMD & ATI merger is successful, in my opinion the new company will need to produce more chips that will be functional in the thin computing environment. While the company may find that a good share of their market will always be in the home users, I believe if they want to compete in the future for the high dollar business market, they will need to cater more to thin client computing server and client chips.
    rdaviddd
    • Thin Client is a nitch market

      The cost of the backend for anything other than something run on a large (mainframe) system makes the thin client dead on arrival. Cost for the thin client hardware is almost the same as a basic computer and you can do a lot more with a computer.

      You still need the same basic licensing in a Microsoft environment plus server licenses and Citrix licenses. Therefore, why pay for the server farm to provide the Citrix environment when I can cut the entire cost of the server farm out of the equation? And believe me, those server farms are expensive!

      This does not take into account the network bandwidth required for remote users. Hey not everyone is in a single building situation. That WAN bandwidth is expensive. CFOs really hate to pony up the money to increase the pipe.

      Here is another cost that often is misrepresented, cost of patching and maintenance. You have to patch the thin clients and maintain them. There is some savings there, but no where near enough to offset the total server farm costs.

      The second nitch for thin client is in a highly secured environment. Here the overriding need for a secure controlled environment makes the thin client a better choice. It still costs more than a basic computer.

      I have had multiple "a thin client choice is cheaper" arguments tossed off at work. Once the cost analysis is completed, the thin client genie goes right back in the bottle never to be raised by that poor sole. It is expensive compared to today?s cheap basic computers.

      The thin client has its place. Just not as a desktop replacement.
      PeterBoyles
  • Thin computing is a joke

    The thinest of computers in the future are still going to be full fledged PCs... "thin" computing is just a marketing name for "dumb terminal". If PCs stayed at $1000+ then there MIGHT be a chance for thin computing... but progress is on the side of the PC not the dumb terminals. Thin computing is D.E.A.D... DEAD.
    ggibson1
    • Thin computing is a joke

      I completely agree. The only way thin computing would ever be a viable option is if the entire country was wired for broadband speeds, and its not. In my neck of the woods it wont be for at least another 10 years because of the money hungry Bell system. With the AMD/ATI merger they can stand to create some wonderful PC's and bring the PC market even LOWER.
      twright9
    • Some people think it is not. Which is an irony in a way,

      for [i]they[/i] are the jokes.

      Can't see beyond the upfront cost.

      And they're still attached to Microsoft; the same company they piss and moan endlessly about regarding security concerns.
      HypnoToad
  • Where's the evidence of this "inexorable trend"?

    Your argument for this article is based on a premise that you assume and I've never seen any evidence for.

    There has been and maybe always will be a hard-core club of believers in thin-client, just as there are still people who believe in a flat earth.

    A large number of these die-hards are indeed enterprise IT managers who'd love to centralise and "simplify" their environments, returning to the halycon days of big-iron systems when IT ruled...before the arrival of word processing software and spreadsheets. Mumbling about those dreams is a Grand Canyon leap from convincing users to give up their PC's.

    If there is such a trend, make that case first. It certainly isn't widely known.
    Langalibalene
    • Agreed: Where's the evidence?

      Come on Mr. Foremski, put your data where your mouth is.

      I could easily argue that:
      1) There is as much growth in home machines as business machines, and home machines have multiplte purposes, including GAMES.
      2) Even in "thin client" computing, browser are grabbing more and more resources; a faster machine yeilds better browsing results.
      3) With the trend towards AJAX and WinForms, even so-called thin clients are asked to do more and more on the client.

      If thin-client was so important and didn't require computing resources, why don't ATI and NVIDIA focus on cheaper graphics than faster graphics?
      timbc
  • A place for everyone/everything

    There is a place for more and more powerful thin clients, in fact several places, anywhere that clerks, support personnel or any other number of service workers do their jobs.

    There is also a place for full systems, at work and at home.

    The company that can cater to every kind of user and do so efficiently, effectively and at the best price point is the one that will grow the fastest.

    AMD/ATI, however nasty the merger may look on the surface, is poised to create an amazing line of thin client solutions, while still leveraging their position(s) in the fat client market.

    However much I might prefer to build systems with AMD CPUs and nVidia GPUs, personally, I can only see this merger as an advantage in the market. I'll just have to snap up an SLI Aliendell while I can still get my preferred combination :)
    percuno9
  • smoking the silicon?

    Brilliant analysis. For a small niche.

    Home PCs - forget about it. Nobody in their right mind is going to be interested in thin clients for their home for MANY years. How many homes still have no broadband access? How many people want to entrust all their personal stuff to a service provide like a cable company or a phone company? None that I know.
    Business PCs - forget about it. We haven't purchased a new desktop in years. Laptops are where it's at (not that I'm a fan). Laptops and thin clients are kind of polar opposites are they not? I live in Oakland county MI, one of the early adopters of the pervasive free wireless access and I'm still a year or more from having access.
    Who buys the most AMD CPUs and video cards? Gamers. Think they're going thin client?

    So who fits your model? Stationary office workers who never work away from their desk or out of the office. In short - few.
    shraven
  • Maintaining client base

    Assuming that thin clients do become a popular option, the AMD/ATI merger makes a lot of sense. If the thin client is going to be minimal processing with the entire client-side computer being compressed into one chip, it makes perfect sense to merge the companies. If they didn't merge, then they would both have to work together with someone if they were going to survive. Merging eliminates the risks of 2 companies producing one chip that they still would have to market together.

    I don't really think that this will happen. As other users have noted: there really is a limited market for thin clients. Think about it this way, we all know that SUV's aren't really safer, are less fuel effecient, and still sell. By the time thin client models' advantages are enough to motivate people to move to them, energy will cost enough that most people will have probably stopped using computers for anything that doesn't absolutely require them.
    knemow
  • AMD/ATI

    Commodore VIC-20 computer may be an item also. People like to controal it is a fact. why would anyone whit money wont a dumb box that only works if the server is up in bobbay inda
    loydc19
  • Way off base

    This sounds like a rehash of "Why would anyone want a P.C. when you can have a dumb terminal (yesterdays thin client) hooked to our big mainframe.

    There are hundreds of thousands of small businesses and millions of individual P.C.'s. I have heard this before, in the late 70's and in the early 90's. Sounds like the opinion of a big company CTO.
    Baer