Advanced Micro Devices will continue to supply ATI graphics chips for PCs based on Intel microprocessors despite the fierce competition between the two companies, AMD's chief technology officer said in an interview.

The Intel question loomed large after AMD bought ATI last year. Many believed that AMD would stop supporting Intel microprocessors with the ATI chips, and that Intel would encourage its customers to use its own graphics chips or those from other companies besides AMD.

AMD CTO Phil Hester said at Computex last week that AMD will continue to supply ATI graphics products that work with Intel processors. It makes business sense for AMD to do so and there still a healthy market for ATI products paired with Intel processors, he said.

AMD also believes that the introduction of its Fusion chips in 2009, which will put graphics functions and the microprocessor on a single chip, will not spell the end for discrete graphics components, Hester said.

That's good news for gamers and other people who want top-end multimedia performance for work or home applications. Graphics cards with discrete GPUs (graphics processing units) have always delivered far better performance than chips with graphics built in, such as PC chipsets.

Fusion processors will improve as AMD discovers new ways to boost the performance of graphics processors and microprocessors, Hester said. One area of improvement for GPUs will be in power consumption. GPUs still use more power than microprocessors, so there is an opportunity for AMD to use the lessons it has learned to reduce power consumption in microprocessors and apply them in GPUs.

The importance of graphics in so many devices was a major reason AMD bought ATI Technologies Inc. "The future is consumer electronics and the PC," said Hester, indicating Fusion will be important for AMD in both segments.

Handsets are already a major market for ATI graphics. Over 200 million ATI chipsets have already been shipped in handsets, he said.

David Orton, the former CEO of ATI and current executive vice president of AMD's visual and media business, said ATI graphics products will continue to challenge nVidia, which was ATI's biggest rival, for the premium end of the market.

Two important areas for the graphics industry today are further improving picture resolution, and 3D (three dimensional) viewing. In picture resolution, the industry is talking about moving to 4 million pixels per frame resolution, twice the number of pixels found in the best high definition television (HD TV) out today. Advances in 3D should lead to images jumping out of the screen within the next few years in games and in graphics intensive work such as mechanical design, Orton said.

One problem the industry has been trying to solve for the high-definition video era is making sure that users can watch HD movies on laptops without running out of battery power. Orton said the graphics processor in ATI Radeon HD 2000 graphics cards contains a unified video decoder to decode HD DVD and Blu-ray Disc movie discs, instead of passing the decoding work to the microprocessor. The difference is that a laptop with an ATI Radeon HD 2000 should be able to show an entire HD movie on a single battery.

At Computex, Acer, the world's third largest PC maker, showed off an AMD-based laptop PC with ATI's HD 2000 technology inside.