ATI extends graphics to chipsets

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ATI Technologies, the No. 2 graphics chip company, is looking to recharge itself with a leap into the growing but risky market for PC chipsets. ATI said on Wednesday at the CeBIT trade show in Germany that by midyear it will have five Radeon IGP integrated chipsets: a mid-range and low-end model for desktop PCs based on Intel's Pentium 4 processor, one for Pentium 4 notebooks, and models for laptop and desktop PCs based on Advanced Micro Devices' Athlon chip. Each will have a graphics core based on ATI's standalone Radeon graphics processors. Chipsets connect a PC's processor with other system-level components such as memory and input/output controllers. PC manufacturers have increasingly looked to integrated chipsets, which combine a chipset with a graphics processor, to cut costs for low-end PCs. ATI's first foray into chipsets comes after several years of declining market share, as rival Nvidia has extended its lead in the market for standalone PC graphics processors into new markets such as the Xbox video game console. Intel includes integrated graphics processors in several versions of its 810 and 830 chipsets, and Nvidia recently entered the market with its nForce integrated chipset for Athlon-based PCs. Intel exited the market for standalone graphics chips in 1999, after spending millions of dollars on acquisitions, because of lackluster sales. Since then, however, it has become the biggest supplier of PC graphics in the world because of sales of its integrated chipsets. Rajesh Shakkarwar, director of marketing for ATI, said the Canadian company forecasts that 60 percent to 70 percent of graphics processors will go into integrated chipsets by 2006. ATI can be a strong player in the market because it offers more advanced graphics technology than competitors, he said. "These products mean owners of value PCs will have access to the same caliber of graphics," he said. "We're offering a lot more for the same price." But MicroDesign Resources analyst Peter Glaskowsky said it's hard to compete on anything but price in the integrated chipset market, which he believes will continue to account for about half of all PC graphics chips into the foreseeable future. "Integrated chipsets sell to customers who don't care enough about graphics to pay a premium for that, so a company that's primarily involved with graphics ends up not making much on their primary contribution," he said. "It ends up being much lower profit than the separate graphics products. You don't get to sell them for very much above the price of manufacturing." Chipsets are a better proposition for the likes of Intel, which can sell them to PC makers as a part of a package with processors and motherboards, Glaskowsky said. "For companies like ATI or Nvidia, where they don't sell CPUs, they don't get the benefit of driving sales for a higher-profit product." Mercury Research analyst Dean McCarron was more positive, saying that as a graphics specialist, ATI can make a convincing argument to PC makers for the technological superiority of its integrated chipsets. But the chipset part of such a product also requires some expertise, he said. "I think the situation is that if you're doing an integrated graphics chipset, you're more likely to have a better graphics core when somebody with graphics experience is doing it," McCarron said. "But whether you're a graphics maker or a chipset maker, the other piece is never as easy as you think. ATI's predecessors have all found the chipset piece to be a little more difficult than they initially thought." Besides graphics performance, ATI's selling points for the chips include its Flexfit Universal Platform Architecture, which allows PC makers to settle on a more standardized motherboard design regardless of the processor being used. The mobile chipsets also incorporate PowerPlay instructions that adjust graphics performance to extend a notebook's battery life. "It makes for a very power-efficient notebook," Shakkarwar said. McCarron said ATI's strongest chipset pitch is for the mobile market, although by having products covering the full range of AMD- and Intel-based PCs, the company can make a better argument to PC makers. "By covering all their bases, any opportunity that presents itself, they can try to take advantage of it," he said. The new chipsets will work only with DDR (double-data rate) memory, another sign that the PC market is standardizing on DDR rather than low-end SDRAM and high-end Rambus memory. "Intel tried to twist our arms a bit, but they gave up," Shakkarwar said. "There's no Rambus on their road map looking forward." "I would see it as confirmation that DDR is moving into the mainstream," McCarron said.

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