I'm still scratching my head trying to figure it all out. AMD just pissed on the gamers market. AMD just doesn't have it to wage war on two fronts. This ultimately means that ATI will slow down it video R&D. ATI will still be a player in the market but expect it to focus on the "consumer and business" value and mid range markets. nVidia will be happy with the slowed down pace and will finally be able to reap some profit out of the graphics market and focus on the high end market. nVidia will continue to produce chipsets for AMD to support it's high end video products.
I must admit the first thing that came to mind when I heard this was that AMD wanted both it's own chipset/motherboard designers, which ATI has much experience with, and that it wanted to integrate low end graphics on it's chipsets and to create processor/chipset/graphics integrated products. The more silicon produced the greater the economy of scale will be. So their is more bang for the buck in running their own foundry and it gives them a lot more clout when it comes to dealing with independent chip foundries.
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I still think that the future design of consumer and workstation computers will be something akin to short blade servers. Basically the motherboard becomes more like a back plane with various common I/O devices and control logic and the processor and memory will move off onto it's own processor card. Devices and processor cards will plug into the same type of slots; of course some motherboards will more higher capacity slots just like we now have some motherboards with 2 x16 PCI-Express slots. The graphics card just becomes a specialized processor card on par with a general CPU card.
So in a sense AMD just bought another co processing CPU architecture. It's easy then to imagine graphics houses buying up machines with one CPU card and all the other slots being filled with graphics processing cards.
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P.S. And since a GPU is now akin to a CPU architecture, I'm not positive now, but I strongly suspect that Linux, BSD and other operating-systems can expect full hardware specs on video chips so that they can write their own drivers within the year. AMD is a lot more open and they have bigger things to worry about than writing video drivers for lots of little operating systems.
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