On Tuesday, Intel and DreamWorks announced an alliance to “revolutionize” 3-D animation technology. The studio has committed to producing all of its feature films in stereoscopic 3-D beginning next year. Although no financial terms of the deal with DreamWorks were disclosed, apparently Intel made them an offer they couldn’t refuse. AMD, meanwhile, loses a high-profile customer to its rival while it tries to right the ship after a financially disastrous year in 2007.

As reported by the Wall Street Journal, DreamWorks gave the nod to Intel after a three-year foray with AMD and its Opterons. In addition to providing DreamWorks with all the chips they can eat, Intel will also provide the studio with a team of programmers to help the animators get the most out of the silicon. From the WSJ article:

The pact is expected to replace the studio’s computing hardware — which now includes 1,500 Hewlett-Packard Co. server systems and 1,000 workstations that use AMD microprocessors — with new H-P systems that use Intel chips. DreamWorks Animation said the resulting increase in computing power would substantially shorten the time needed for many computing chores and aid the studio’s planned shift next year to 3-D animation. “For our artists, the impact is going to be really nothing less than monumental,” said Jeffrey Katzenberg, DreamWorks Animation’s chief executive.

According to the WSJ report, DreamWork’s Katzenberg stressed that “the move was based on capabilities of two forthcoming generations of Intel chips.” Presumably he is referring to Nehalem and Larrabee.

Nehalem is Intel’s next-generation x86 microarchitecture that is scheduled to debut in Q4 2008. Those processors will be delivered on 45nm nodes — the same as the current Penryn chips — but include some of the biggest changes to the microarchitecture in years, including the new QuickPath interconnect and integrated memory controllers (IMC). Initial testing suggests the upcoming chips may actually live up to the hype. Ironically, the new approach is seen as a validation of AMD’s HyperTransport/IMC design, which AMD exploited to their advantage over the last several years as Intel clung to its legacy front-side bus and off-chip memory controller design.

Perhaps a bigger attraction to the gang at DreamWorks is Larrabee, Intel’s manycore GPU-like processor that will double as an HPC accelerator. The architecture should be very well-suited to 3-D animation rendering, especially as the realism offered by compute-intensive ray tracing algorithms becomes more important to animators. The hook for Larrabee is that since it’s based on standard Intel Architecture, at least the non-vector part of the software environment should be quite familiar to developers. Today though, the architecture exists only on PowerPoint slides; first production silicon is expected to be delivered sometime in late 2009 or early 2010.

The reason Larrabee should be especially interesting to DreamWorks is it allows them to tap into a level of performance not possible with a CPU-only solutions. Like a lot of high performance applications, animation rendering needs something faster than Moore’s Law to keep pace with the demands of the industry. DreamWorks Animation CTO Ed Leonard has noted that despite raw compute power doubling every year and a half, CPU rendering hours for a given computer-generated movie still double every three years. If studios expect to flatten this curve, they’re going to need to switch platforms.

Which is why the Intel-DreamWorks deal is not just bad news for AMD and its high-end mindshare; it’s also bad news for GPU vendors. NVIDIA has been trying to drum up interest from animators to use its mental ray rendering software (from the NVIDIA’s mental images subsidiary) on top of their GPUs. For studios, that would mean building clusters with GPU-equipped servers. But more importantly, it would mean changing the software model. My guess is that most big studios have big investments in their own rendering code and switching to third-party software is probably out of the question. At least for the time being, DreamWorks is betting on the Intel roadmap as the smoothest path to 3-D glory.