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AMD Steps Up Chip Challenge

Updated from 2:26 p.m. EDT

Three months after announcing it would buy ATI Tech for $5.4 billion, Advanced Micro Devices (AMD - Get Report) put its cards on the table.

In the same breath that it announced the official completion of its merger with the Canadian graphics chipmaker, AMD unveiled its vision for a new generation of microprocessors.

AMD said the new class of processors, codenamed Fusion, will integrate both the CPU and the graphics capabilities on the same chip, and will be available by late 2008 or early 2009.

Fusion processors will provide significant improvements in performance-per-watt compared with current microprocessor architectures, and will offer the best user experience as advanced graphics becomes a more important part of computing, according to AMD.

Not that the news was a huge surprise: AMD executives had hinted since the deal's announcement about a vision of the future in which graphics are integrated directly onto the CPU.

But by unveiling details of the initiative and a specific timeline right off the bat, AMD showed that this innovative strategy played as much of a role in the $5.4 billion merger as the more practical, near-term consideration of acquiring ATI's chipset products.

Chipsets put AMD on a more equal footing with Intel (INTC - Get Report), which sells complete "platforms" consisting of a microprocessor and a chipset -- the component that shuttles the data into and out of the microprocessor.

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