January 23, 2007 9:43 AM PST

AMD selling beauty and the brand

Advanced Micro Devices' hopes for limiting Intel's surge in 2007 are coming into focus.

Things have changed a bit in the ongoing tussle between Intel and AMD. After a three-year hiatus, the Core 2 Duo brought Intel back into the good graces of the PC enthusiast, and price wars have taken their toll on AMD as it prepares to announce disappointing earnings later Tuesday.

The company plans to counter the positive reviews of Intel's chips by pointing out that the processor alone doesn't make the PC. It's taking aim at the performance of Intel's integrated graphics chips, emphasizing its work with graphics specialists such as Nvidia and its own ATI Technologies graphics division.

The weapons for this duel? The standard armament, of course: little colored stickers. AMD hopes its Better By Design effort will convince consumers that graphics performance matters, as Microsoft's graphics-heavy Windows Vista operating system gets ready for its debut. But the chipmaker might be courting an audience that doesn't particularly care.

Intel's Core 2 Duo was a hit with the legions of Web sites that scrutinize processor performance. AMD won't have a true answer until the middle of this year, when it launches quad-core chips. So, in looking for an Intel weakness to exploit, it has settled on the performance of Intel's chipsets with integrated graphics.

A chipset connects the processor to the memory and the rest of the system. Low-end and middle-of-the-road PCs usually come with a basic graphics processor integrated into that chipset. Any PC user truly concerned about graphics performance usually buys a separate card from companies like Nvidia or ATI with a processor and memory dedicated just for graphics performance.

PCs with integrated graphics are designed for basic Web and e-mail computer users, people who just want enough visual acuity to check the temperature on a weather map or zap an emoticon. This is good enough for a surprisingly large segment of the PC buying population. Price-conscious buyers have made Intel the primary supplier of PC graphics technology through its integrated graphics chipsets.

The problem, as AMD sees it, is that people don't realize how much more they'll appreciate higher-performance graphics--especially in Vista, said Scott Shutter, AMD's division brand manager for mobile products. "Graphics is a key component as you move into the Vista era; both the consumer and commercial market will have more of a need for better performance from a system aspect," he said.

For several years, AMD has turned to Nvidia and ATI to make integrated graphics chipsets for its processors. Those companies are obsessed with graphics performance, and have historically turned out better-performing products for the integrated market than Intel, said Jon Peddie, an analyst at Jon Peddie Associates who closely follows the graphics industry.

Intel looks at the integrated graphics market a little differently from its competitors, said Josh Newman, product marketing manager for Intel chipsets. Intel designs a chipset with a certain transistor budget, and once the essential chipset functions have been satisfied, the graphics team gets only a certain amount of "gates," or transistors, to work with, he said.

"Graphics is a key component as you move into the Vista era; both the consumer and commercial market will have more of a need for better performance from a system aspect."
--Scott Shutter, AMD division brand manager

Therefore, Intel offloads a decent amount of graphics processing onto the main CPU to help boost graphics performance. This approach makes it very cheap to put basic graphics technology inside a PC, about $3 or $4 per chipset, Newman said.

AMD's integrated graphics technology, on the other hand, is essentially the low-rent version of technology that was designed first and foremost for standalone graphics processing, said Dean McCarron, an analyst at Mercury Research. "Nvidia and ATI do graphics first. They are graphics companies, and people are expecting them to deliver a certain amount of performance," he said.

That nicely sums up AMD's new twist on PC marketing: branded graphics are better. It's a variation on AMD's playbook from the past few years spent searching for a response to Intel's Centrino marketing strategy.

Centrino--and the lesser-known Viiv and VPro brands--are designed around the premise that Intel will provide PC makers with all the essential hardware needed to run a PC. In exchange for using an Intel-specified lineup of components, PC makers get the right to slap a colorful Intel Centrino or Viiv sticker on their PCs and other marketing support from the chipmaker.

AMD has countered that strategy by taking the opposite tack. It tells PC makers and consumers they can select from a wide variety of combinations using the best that third-party chipmakers have to offer for chipsets, graphics and wireless technologies. In its latest iteration, this is known as Better By Design, Shutter said.

CONTINUED: Shoppers hunt for deals…
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