Apple-Nvidia alliance a further blow to ATI

SAN FRANCISCO--Apple's move to incorporate Nvidia's chips into its new, speedier Power Macs is a further changing of the guard in the ever-turbulent and quickly consolidating graphics chip market.

Apple, Nvidia heat up chip war Peter Glaskowsky, senior analyst, MicroDesign Resources

Apple announced Tuesday that its newest Power Macs will come standard with Nvidia's GeForce2 MX chips in all but the slowest model, which will come with ATI's Rage 128 Pro chip. ATI's higher-end Radeon chip remains an option on all the new Power Macs that are custom built.

For Santa Clara, Calif.-based Nvidia, already an industry darling, the move is another sign of its rising-star status. Analysts say the move is a further blow to the former top dog--Canada's ATI Technologies--which was in all Macs before the new models announced at this week's Macworld Expo trade show here.

"Their market share, at perhaps their biggest customer, could disappear over the next several years," said Peter Glaskowsky, an analyst with Microdesign Resources. "It's up to ATI to prove it's a better supplier of chips. That is going to be difficult to do."

Nvidia's move into the Apple market was expected, as Nvidia first said last year that the GeForce2 MX was Mac compatible. Nvidia chief executive Jen-Hsun Huang told CNET News.com in November that the next news about Nvidia's Mac plans would probably be coming from Apple CEO Steve Jobs.

ATI characterized the decision to add Nvidia's chips as simply a move by Apple to broaden its portfolio of suppliers.

"Apple is one of the last, if not the last, tier-one PC manufacturers to adopt a second source strategy," ATI spokesman John Challinor said. "Doing so, in our opinion, is a good strategy. It's a strategy we've used for years."

Glaskowsky disputed ATI's take on Apple's move.

"I don't really think this is representative of a company that is looking for a second source," Glaskowsky said. "I think it looks more like a company looking for a different source."

Ruffling feathers
ATI ruffled Apple's feathers in July when it announced that its chips would be part of iMacs and Power Macs that Apple had not yet introduced.

ATI has been losing share to Nvidia in general in the overall PC graphics chip market.

In addition, the graphics chip industry has been consolidating rapidly, with a number of companies exiting the market, including 3dfx and Gigapixel, both of whose assets were picked up by Nvidia.

However, Glaskowsky said that even if Apple wants to move exclusively to Nvidia, such a move will take time--at least a couple of years. Among the reasons: ATI has strengths in video processing, and much of the existing base of Mac software is optimized for ATI cards.

Nvidia spokesman Derek Perez said the company plans to include Macintosh support on all its future product lines.

"The only thing limiting us in this market is Apple's adoption," Perez said. "It may be a slower growth cycle than on the PC side."

Mac owners had been asking Apple for some time to offer Nvidia's chips.

Daniel Krach, who both uses and sells Macs at Di-No Computers in Pasadena, Calif., called Nvidia a welcome addition to the Mac lineup. Nvidia chips probably won't be a big driver of sales to professionals, Krach said, but the lack of Nvidia graphics is one reason that Macs haven't been the machine of choice among hard-core computer gamers.

"This will sort of even it up a bit," Krach said, while browsing Apple's booth at Macworld.

Consumers' options
For now, Mac customers who want Nvidia graphics will have to buy one of the new Power Macs because there are no Mac-specific add-on cards that use Nvidia chips. Perez said Nvidia is not working with any graphics board maker to offer Mac-compatible add-on cards, which enhance graphics performance, and would do so only if Apple wanted such a product.

However, Glaskowsky added that he would be surprised if there weren't third-party cards by next Christmas.

And for many people, Glaskowsky said, ATI's Radeon chip still remains a better bet because it is faster and compatible with more Mac software than the GeForce2 MX, a low- to midrange chip in Nvidia's line.

However, Glaskowsky expects that by summer, Nvidia's forthcoming NV20 will be the best Macintosh graphics chip on the market.

"NV20 will definitely be faster than anything ATI has out there," Glaskowsky said.

For ATI's part, the company said it plans to continue to develop new chips for the Mac market.

"We believe competition is good," Challinor said. "We are going to continue to produce superior technology for Apple products."