AMD’s Fusion chip takes a CPU and GPU and combines them into a single die. AMD is calling this combined chip an Accelerated Processing Unit (APU). The first APU from AMD will be called the Fusion chip. This new chip is expected to arrive in 2011. They also gave a public demonstration of the Fusion chip in action at Computex.

If both AMD and Intel fuse the graphics processor and the CPU into one chip, this could spell trouble for Nvidia. One the one hand, there will probably still be a need for discrete graphics cards for some time. I doubt that the Fermi chip could ever successfully be fused with an x86 chip due to its power requirements. On the other hand, most people do not need separate graphics cards. By combining the CPU and GPU, the size of the market will shrink for Nvidia.

Advanced Micro Devices gave reporters a first look at its new Fusion processor on Wednesday, but the company kept them from getting too close. An AMD executive didn’t want reporters getting too close a look at the wafer during a photo session. After the photos were taken AMD staff hurridly rushed the wafer into hiding.