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AMD is looking to put a troubled 2007 behind it with a pair of announcements Tuesday highlighting its desktop chipsets and manufacturing advances.

The company plans on Tuesday at the CeBit conference to unveil its most up-to-date integrated graphics products for low- to mid-range desktop PCs in the new 780 series chipsets. The chipsets allow moderately priced PC buyers to run games based on the DirectX10 technology and to get additional performance out of discrete graphics cards if they need more juice.

Integrated graphics chipsets are used in the majority of PCs sold in the world. They're designed to provide PC users with basic graphics technology at a lower cost than adding a discrete graphics chip from a company like Nvidia or ATI.

AMD was a little late to the party when it comes to delivering a standardized CPU and chipset combination, but its acquisition of ATI Technologies allowed it to catch up to Intel. Intel's integrated graphics division has struggled over the past few years, and AMD has tried to seize upon that weakness as a competitive balance to Intel's current advantage in just about every other part of the market.

The support for Microsoft's DirectX 10 technology allows more sophisticated games designed using the technology to run on AMD-based PCs, said Niles Burbank, a product manager in AMD's graphics division. Perhaps not nearly as well as those games would on a more expensive gaming system, but at least they will work.

And if customers of a 780-series PC decide they'd like a little more performance, they can use AMD's Hybrid Graphics technology to add in a discrete graphics card and get the combined benefit of both the integrated graphics and the discrete card. According to AMD, most times the integrated graphics technology in a generic chipset is disabled when a PC owner adds a discrete card to the mix.

PCs using the chipsets will start arriving in the second quarter from all of AMD's current partners, including the big guys like Hewlett-Packard and Dell. There will be two varieties, the 780G with more performance and the 780V for the truly cost-conscious buyer.

AMD is also using CeBit, held in Hannover, Germany, to make a manufacturing announcement related to its chip-making factories in Dresden. The company will formally announce that it has begun shipping samples of "Deneb" and "Shanghai," its first 45-nanometer processors for desktops and servers, respectively.

Deneb and Shanghai are essentially shrunken versions of the integrated quad-core Phenom and Barcelona processors introduced last year. AMD is well behind Intel in introducing 45-nanometer processors, as Intel's first models shipped in November, and has set an ambitious goal of switching from 65nm chipmaking technology to 45nm technology in 18 months; it usually takes 2 years.

When a high-ranking executive at your strongest partner openly thinks your technology "barely works," perhaps it's time to make that a higher priority.

A series of internal Microsoft e-mails discussing Intel's 915 and 945 integrated graphics chipsets in unfavorable terms made its salacious way around the Internet this week. Microsoft is currently being sued over its Windows Vista upgrade programs, which were designed with pressure from Intel, but over the objections of the PC industry, to include support for a graphics chipset that couldn't run Vista's Aero interface.

In February 2007, just after Vista launched, Microsoft's Steve Sinofsky told CEO Steve Ballmer that the 945 chipset, required for the "Vista Premium Ready" logo, could barely run Vista. And everyone (inside the PC industry, at least) knew the widely used 915 chipset that was awarded the "Vista Capable" logo couldn't even think about running the advanced display driver model used to deliver the fancy Aero interface, considered one of the major selling points of Vista.

Juicy stuff, for sure, but it's old news that Intel and Microsoft have been in engaged in "coopetition" for years. The real lesson is just how badly even Microsoft thinks of the current state of integrated graphics.

Intel likes to mention that it's the world's leading supplier of graphics technology. The only reason it can claim that mantle, however, is because people like bargains, and the way they get those bargains is through the use of integrated graphics chipsets.

Around 75 percent of the notebooks, and around 60 percent of the desktops, sold last year used integrated graphics chips. The rest use discrete graphics chips made by Nvidia and AMD that offer far more powerful performance for games and video.

The integrated graphics chips, usually thought of as "good-enough graphics," really aren't that good. Intel has had loads of problems with its graphics chipsets and their support for PC games or other intense graphical programs. Most of that software will run, but not in an ideal fashion, and lots of people expect that shiny new PC to be able to run PC games without fits and starts or jerky gameplay.

Intel has put the 915 and 945 chipsets behind it, but challenges remain. It still encountered problems with the release of the 965 chipset, and the G30 series has yet to make it into notebook PCs. This area represents arguably Intel's most glaring weakness at present.

The company has shown it's getting more serious about graphics, hiring more engineers and focusing some of its design prowess on projects like Larrabee. And it tried to take a big step forward in the performance of its 965-series integrated graphics chipsets by adding support for functions like transform and lighting. It had lots of problems delivering drivers for that chipset, however, and when those drivers arrived, they didn't deliver a uniform boost in performance.

Nvidia and AMD are way ahead when it comes to understanding how to build graphics chips. Nvidia has been doing this for years, and AMD recognized the growing importance of graphics when it acquired (for far more than it should have paid, however) ATI Technologies in 2006.

Graphics chips and CPUs like the Core 2 Duo are two very different beasts, but the wholesale embrace of multicore processor designs means that at some point, graphics technology becomes just a core on the main chip. AMD is well underway with planning for its Fusion processor and Nvidia seems to be eyeing broader uses for its high-powered graphics chips.

This is Intel's next great challenge, now that it has thankfully derailed the March of Itanium and soothed the burns from the Netburst architecture.

It needs to somehow get up to speed with Nvidia and the former ATI when it comes to graphics knowledge while keeping an eye on the rest of its business. Intel has found it difficult in recent years to break into new areas, such as flat-screen TVs or cell phones, that have very different processing requirements and architectures than the CPU.

But those other bets were just that, bets. This time, Intel has no choice. Intel can't afford to fall behind as the PC industry changes; it's one thing to swing and miss when trying something new, it's quite another to miss the mark on your home turf.

By the time Windows 7 rolls around, Intel will need to do better than "barely works."

It appears that Intel still has some work to do in getting its act together on PC graphics.

New drivers for the company's 965GM chipset, found in many notebooks and midrange desktops, still don't deliver the uniform performance increases promised earlier this year, according to testing by CNET Labs. My colleague Julie Rivera benchmarked three games on a PC with both the older drivers and the newer ones, and concluded that while some improvements could be detected, the new drivers don't do nearly enough to improve performance across multiple games.

This graphic may come in clearly, but Intel's 3D graphics performance isn't quite up to snuff.

(Credit: Intel)

Integrated graphics are the budget-friendly way of getting 3D images displayed on your PC. They are built into the processor's chipset, which saves a ton of money for both the PC builder and the end customer compared with powerful but expensive discrete graphics cards from Nvidia and Advanced Micro Devices. Serious gamers tend to buy more powerful configurations, or build their own systems, but casual gamers intrigued by popular titles like Quake or F.E.A.R. might not realize they need the extra performance.

So last year, Intel decided it was going to make a leap in the 3D graphics performance to make popular games more enjoyable on low-cost hardware. The 965 started shipping last September, but for some reason it took Intel nearly a year to write the drivers needed to unlock that performance, finally releasing them in August.

According to the tests, it wasn't enough. F.E.A.R. did see a noticeable boost in performance with the new drivers, but Quake 4 performance was about the same compared with the older driver. And Company of Heroes was well below the expected performance of such a game, even when Rivera used the settings recommended by Intel.

Better graphics are definitely on Intel's radar these days, but it could be awhile before the greater emphasis turns into products. Many Intel-based PCs on sale right now use an updated chipset with better graphics performance, but if you want to play 3D games--even just now and then--it's probably best to suck it up and buy the more expensive configuration with a discrete graphics card. CNET Reviews can help you choose which one suits your needs.

Owners of PCs with Intel's 965 chipsets can finally download drivers that will immediately improve the performance of games running on those systems.

The 965 chipsets were supposed to be a dramatic step forward for integrated graphics performance. Most PCs come with graphics technology built right onto the chipset that connects the processor to memory and the rest of a PC. Serious gamers opt for discrete graphics made by Nvidia or AMD's ATI division, but most people save a little money and get the basic graphics.

Intel wanted to make an integrated graphics chipset with more powerful graphics performance that would allow basic PC users to play some of the latest and greatest 3D games when it shipped the 965. But it has been unable to write the drivers needed to enable that performance until now.

Windows XP drivers are available here, but if you're on a Vista PC with Intel's 965 chipset, you'll have to wait a little longer. Intel put together a video here that shows the improved performance of PCs with the new drivers.