In our recent conversation, Dave Orton, the CEO of ATI, made an interesting comment about Fusion and the necessity to integrate products.
Once your device, such as an UMPC gets to a sub $800 price you need to integrate as many components you can in order to continue making money.
Fusion is meant to save power but at the same time to get a balanced core that can drive a UMPC or a similar integrated device while allowing a semiconductor company to earn some money. It is getting really hard to earn the money from these small and cheap cores and once AMD gets a CPU, a GPU and a Northbridge together, the company will again be able to get some money of these chips.
So fusion is more a necessity then a compromise and this is just an extension of what ATI and Qualcomm did with a mobile phone processor which can do graphics, CPU and multimedia, all in one chip. You can bet that Intel will fusion it as some point.