Intel invades graphics ICs

Electronic News, Feb 9, 1998 by Peter Brown

Independent Companies Prepare To Fend Off Giant In Coming Battle

San Jose, Calif.--Intel, which dominates the PC microprocessor market, is expected to enter the graphics chip market within two weeks. The microprocessor giant's first product will be the i740 2-D/3-D graphics engine. With the graphics chip market already in turmoil because of the replacement of 2-D chips with 3-D chips (EN, Feb. 2, 1998) graphics vendors are girding to face off against the largest chip maker in the world. Intel has been planning this move for two years. Most graphics vendors want the i740 to be released so they finally know what they are up against. It's hard to compete against an enemy you know nothing about.

The i740 graphics accelerator will complete Intel's "visual computing platform" that includes the Accelerated Graphics Port (AGP), Pentium II microprocessor, and MMX II, dubbed Katmai, announced last month (EN, Jan. 19). Most anticipate Intel will unveil the i740 at its Developer's Forum that takes place between Feb. 17-19.

"Intel is relentless about the markets it moves into. They almost have a (television's Star Trek) Borg-like ability to assimilate technology and keep going and going," said Jon Peddie, president of Jon Peddie Associates, a graphics market research firm. "Graphics vendors know they can't beat Intel in manufacturing and marketing so they have to concentrate on developing better graphics performance and price their chips aggressively. If they try to do anything else, Intel will roll over them like a tank in a war zone."

Mr. Peddie forecasts Intel will have a 40 percent market share in the high performance graphics chip market by 1999. However, graphics companies have one thing going for them, he added, experience in the graphics market and the fact that most of them have all of their energies pointed at the graphics market, unlike Intel which has its hand in many money jars. "Historically, smaller companies have disintegrated and done more damage themselves than Intel will ever be able to do," said Mr. Peddie. "So instead of worrying about Intel, they should focus and concentrate on graphics rather than moving into five, six, or seven different markets." This lack of concentration led to Oak Technology and Cirrus Logic both exiting the graphics business during the last two weeks (see story, page 20).

According to Mike Feibus, principle analyst at Mercury Research, a market research firm based in Phoenix, Ariz., one advantage most of the fabless graphics chip makers have will be access to next generation process technology without having to wait on a microprocessor to come out. Intel will move along its graphics technology once a new generation of MCUs rolls out, he said. Until then, the company might utilize its older processes for the i740.

"When a market is this competitive and fast changing and your primary focus is on something completely different, you make compromises," said Mr. Feibus. "Hell will freeze before Intel does anything to jeopardize their microprocessors for graphics or anything for that matter. So graphics will have to use those processes Intel won't use for its MCUs."

Up-and-coming graphics house, Nvidia will continue to focus on the company's main goal, delivering the best architecture and overall 3-D graphics engine the company can while trying to maintain a reasonable price point, said Lew Pacely, VP of marketing for Nvidia. "The graphics market has survived for years now without Intel and nothing has changed in order to survive. It's still all about having the right technology at the right price," said Mr. Pacely. "Everyone talks about Intel and their advanced process technology. However, a dilemma for Intel is for every graphics chip they ship on their 0.25-micron process they are not shipping a Pentium II. It will be interesting to see if they use an older fab or sacrifice some Pentium chips for an advance graphics technology. My guess is they will use an older fab and be utilizing the same process geometry every fabless company is using."

Chip maker Rendition agrees the fabful versus the fabless question will be one of the key differentiators. Jay Eisenlohr, VP of marketing at Rendition, said a fabless company has the advantage of moving from foundry to foundry to get the best process technology whereas a company with its own fab--especially Intel--would use it for other devices--mainly microprocessors first and graphics ICs second.

"One question that I keep asking is how bad does Intel really want this business? Do they want to sell silicon at the margins they need to sell them to be successful? That question is left unanswered at the moment, " said Mr. Eisenlohr. "Can a company who's graphics focus is a sidebar turn the big wheel every six to nine months in every aspect of the graphics market to keep up with the performance curve? I think it almost takes a start-up mentality to stay ahead. Intel is far from a start-up."

Rendition has been preparing for Intel for a while adding into their strategic plans what some of the consequences might be when the i740 is delivered. The company will not change its business model but will try to stay ahead of the technology curve and enabling high-quality graphics. Rendition has targeted the mid--to high-range graphics business and just this year moved into the lower range with one product. However, the company plans on continuing to push forward with leading-edge graphics to stay ahead.