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How it all shakes out

ATI

What does the Canadian graphics firm get out of this?

Stability: Like AMD, ATI failed to capitalise fully on a period of weakness from a competitor. When ATI had the excellent Radeon 9700 and NVIDIA had the rather poor GeForce FX, it should have been lights out for the boys in green. ATI stumbled with its X-series technology and, whilst it has a large market share thanks to low-end cards, it trails way behind when it comes to the sale of DirectX 9-class hardware, both low-end and high-end. Anecdotal evidence (such as the Steam survey) suggests that most people buying high-end graphics cards are going for NVIDIA solutions (like the GeForce 6800 GT) and certainly, NVIDIA owns the dual-graphics market right now.

ATI has been losing money on its graphics card sales to buy marketshare, whilst propping its business up with TV chip and mobile phone chip sales. The deal with AMD will allow it not only some stability, but some added manufacturing capability which should guarantee its long-term future. (Note: ATI will continue to use its fab partners for a while, but eventually it will move to AMD's own manufacturing facilities.)

"Like AMD, ATI failed to capitalise fully on a period of weakness from a competitor"

Breaking the stranglehold: NVIDIA's relationship with AMD has been a fruitful one. Back from the days of the original nForce chipset, it's been a powerful combination for the gamer, and nForce4 for AMD has been a massively successful platform. It paved the way for SLI, a major signature series for NVIDIA. AMD-ATI makes it very difficult for NVIDIA to find a good way forward (see the next page) and could see ATI becoming the motherboard chipset and graphics board provider of choice for anyone buying AMD processors. This could lead to a massive increase in sales for ATI.

It will also have advanced information on CPU direction and development, enabling it to create radical new products for markets that competitors won't be aware of until briefed, much later, by AMD.

Workstations: ATI has always had rubbish sales when it comes to graphics cards designed for graphics professionals - workstations. The FireGL line has always played second fiddle to the massively dominant Quadro line from NVIDIA. AMD has also enjoyed a massive market share gain over Intel here, with Athlon 64 and Opteron swiftly becoming the platform of choice for graphics workstations. With Opteron now the most popular workstation chip, ATI has a chance to piggy-back onto that success and make dents into NVIDIA's dominance here.

NVIDIA

This whole episode puts NVIDIA in between a rock and a hard place.

Future alignment: NVIDIA makes loads of money selling chipsets for AMD-based computers. The nForce business unit has been a massive success and has been the platform for SLI, which has enabled a growth in graphics cards sales. Now, the provider of its growth base is in bed with its competitor. How can it do business with AMD, how can it share roadmaps and ideas, when ATI will then have access to all that information? AMD now becomes both an ally and a competitor for NVIDIA, and this is difficult.

The obvious answer is for NVIDIA to get closer to Intel, but that is also awkward. This is because both companies want to be platform companies - NVIDIA likes selling motherboard chipsets with integrated networking, graphics, sound etc. It likes being able to offer graphics cards on top of that, and you can bet it has plans to further upgrade its platform technologies with things like integrated physics. The problem is, so does Intel. Intel likes being able to sell the package of motherboard, graphics, sound, networking and CPU. Both want to occupy that system space and so they don't make for good allies.

"NVIDIA has resisted Intel's demands to enable SLI on non-NVIDIA motherboards"

NVIDIA has resisted Intel's demands to enable SLI on non-NVIDIA motherboards, but with the potential for ATI to cannibalise its graphics sales business on AMD platforms, it may find that it has to allow Intel to use SLI on its 975 and 965 chipsets rather than relying on its own nForce for Intel platform. This would allow it to maintain or increase its sale of graphics boards, but could have ramifications for its chipset business.

Potential for Conroe: However, it's not all bad news. ATI had recently been getting very chummy with Intel over the launch of Conroe. With AMD now being owned in the chip arena, now is as good a time as any for NVIDIA to break its alliance with AMD, and possibly the worst time for ATI's graphics business to jump ship from Intel. Conroe is now the optimal platform for gaming, and the association of Conroe with CrossFire could have led to great things for ATI in the medium term. However, the switching of ATI's alliegance to AMD could mean an opportunity for NVIDIA to get in on Conroe's success.

Long-term strategy: NVIDIA is going to have to work hard to find itself a viable long-term strategy. It has been happy selling graphics boards for both Intel and AMD users, even happier being virtually the default motherboard platform for high-end AMD users and has had a bit of Intel motherboard business on the side. It is now being squeezed in all of these areas.

It could be that it decides to fight back along any or all of those avenues. It could counter Intel's moves to dominate the chipset market with a better product that makes Intel look stupid. It can create graphics cards that own ATI in performance, thus negating any 'home advantage' on AMD. It can continue to create great-performing AMD chipsets.

"Will we see an x86 CPU from NVIDIA as it reinvents itself to compete?"

It could also choose to push harder along other avenues. Mobile phones are big business, and a big push could be made here. With next-generation optical content, there is massive potential for video processing chips and technologies, and we could see alliances being made not only on the PC side, but in under-the-TV players too. If the PS3 is a success, there's the chance to build on the relationship with Sony and do more gaming. Then there are the rumours about NVIDIA graphics in the next iPod!

CPUs: AMD now has graphics, motherboards and CPUs. Intel has CPUs, motherboards and will soon have proper graphics. This leaves NVIDIA as the only company out of the three that makes just graphics and motherboards. Will we see an x86 CPU from NVIDIA as it reinvents itself to compete? It could certainly be possible that we see a third player in the CPU sector - it could be crucial for NVIDIA's continued profitability.

The green team has some interesting decisions to make and strategies to formulate.