New chip may portend ATI comeback

The Markham, Ontario-based company on Thursday will unveil the details of the Radeon 9700, a desktop graphics chip based on a new architecture that will provide greater realism when it comes to 3D images, according to sources.

The fastest versions of the new chips will offer considerably higher performance than Nvidia's current GeForce4 roster, giving ATI the edge with gamers as well as PC makers, analysts said. And even after Nvidia--which began to chip away at ATI's leading spot in graphics in 1999--comes out with its GeForce 5 in a few months, the competition between the two will remain close.

"This is not the first time they've had the fastest graphics chip on the market...but it is unusual for ATI to have both significant features and performance advantage," said Peter Glaskowsky, editor in chief of influential industry newsletter Microprocessor Report. "That's exactly what you need when you're competing with someone as aggressive as Nvidia...This is ATI's strongest opportunity in some years to retake the lead over Nvidia."

"It is very clear that the (new) generation of graphics accelerators are probably the most competitive graphics chips we've seen in five years," said Dean McCarron, principal analyst at Mercury Research.

ATI Marketing Director Paul Ayscough said the company would make announcements this week about new products that will be a "revolutionary leap forward" over current graphics technology.

If ATI hits its performance goals and the new chips sell, the company's resurgence will be an oddity in the exceedingly tough market for graphics chips.

Just a few years ago, more than 40 companies designed graphics chips, which sell for only $50 to $90 at the high end. The tight competition meant that companies were spending 18 months to develop chips that had a shelf life as their flagship chip of only six months.

Missing one or two product cycles was often followed by a slide into oblivion. 3Dfx, which enjoyed an Apple Computer-like following in 1997 because of its Voodoo chips, began to spiral following a few product delays (3Dfx was eventually acquired by Nvidia). S3, once of the big names in graphics, morphed into consumer electronics manufacturer SonicBlue after multiple reorganizations.

Intel snuffed out its attempt to get into high-end graphics after a year and a half of embarrassing sales, but later found a niche in making integrated chipsets for cheaper computers.

When Nvidia trumped ATI for the lead in the graphics market, some analysts speculated that the market would become fairly stable as few remaining challengers remained and the company continually showed that it was capable of coming out with products every six months.

Nvidia also continued to increase its market share, as well as its collection of high profile deals, such as the contract to supply chips to Microsoft's Xbox. In the first quarter, Nvidia held 44 percent of the desktop PC market, compared with ATI's 24 percent, according to Jon Peddie Research.

Still, ATI continued to hold the lead in graphics chips for notebooks while maintaining design teams for desktop chips.

"This is the leapfrog process these companies have been in for years," said analyst Jon Peddie of Jon Peddie Research. "Nvidia had an advantage for a while as ATI was reorganizing...but they're very much back in the game now."

The performance edge of the new Radeons is expected to give ATI a significant boost with major PC manufacturers, who have relegated ATI products to a handful of mid-level PC configurations. Dell Computer, for example, offers ATI cards only in its Dimension 4500 desktops. Dell representatives did not respond to requests for comment.

"ATI is significantly engaged with every OEM (original equipment manufacturer) on the planet, so that they can make a case as soon as one's to be made," Glaskowsky said. "The really interesting thing will be with some of the big accounts, whether they make the Radeon the default graphics card. I think the new Radeon is a big enough improvement that they'll have to on some systems."

A Gateway representative said the company was evaluating the new chips but had no firm plans for offering them in its PCs.

Smaller companies specializing in high-end systems for gamers are likely to be the some of the most enthusiastic supporters of the new Radeon initially. Voodoo PC is one of ATI's launch partners for the new chips and will offer them in systems as soon as the software drivers are ready, said Voodoo President Rahul Sood.

"I think this is going to be an interesting time for the graphics chip business," Sood said.

Besides more raw horsepower, major graphics advances with the new chips are expected to come from expanded programming options afforded by DirectX 9, the next generation of Microsoft's ubiquitous graphics programming library. Nvidia last month released a new set of graphics programming tools intended to allow artists to create realistic effects such as fur and grass without the drudgery of hand-coding each item.

Ayscough said ATI would have announcements in the next few weeks about "significant programming tools that will benefit all sectors of the 3D programming industry."

While ATI will have the performance lead for a time, Nvidia is expected to at least catch up with GeForce5. An Nvidia representative said the company would refresh its GeForce product line this fall but declined further comment.

"Nvidia is the sort of company that can light a fire under the engineers and get a lot of work done in a hurry if they need to," Glaskowsky said. "I suspect they going to sound the battle stations' alarm."

Peddie said the new Radeons, combined with high-powered new offerings from second-tier graphic chipmakers such as Matrox and 3D Labs, signals a resurgence of competition in the drastically consolidated graphic chip business.

"The (PC makers) and consumer are the real winners in this," he said. "The competition just makes a lot more choices available."

News.com's Michael Kanellos contributed to this report.