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Chip war may erupt in graphics

Graphics chipmakers are unveiling strategies that may lead to a resurgence of the chipset market--and renewed competition.

ATI, the leading graphics chipmaker, unveiled a program to bring out a graphics chip that combines a key PC system chip, mirroring Intel's and other chipmakers' strategies for low-cost PCs, and leading to a likely resurgence of the system-chip market.

ATI Technologies, which supplies graphics chips to many of the largest PC makers, said that it plans to combine graphics with a key part of the PC chipset.

Analysts say this is more of a proclamation rather than anything concrete but it presages fierce battles to come in this new market. "This is the graphics guys saying they're getting into [the chipset] space," said Dean McCarron, a principal at Mercury Research, a marketing research firm. Because there are dozens of graphics chipmakers, competition could intensify overnight if many decide to start making key PC chips too.

The chipset is a companion to the main processor. To date, the main processor, the chipset, and graphics have all been discrete components in a PC. But now chipmakers are all rushing to combine the chipset with graphics, leading to a revival of the chipset business, according to McCarron.

"The chipset industry hit rock bottom [because of Intel's dominance], but now the pendulum is swinging back in the other direction," he said.

Because of Intel's entry into the chipset business in earnest about five years ago the chipset industry was reduced from dozens of players to a precious few. However, since graphics chip manufacturers such as ATI, S3, and Trident Microsystems--and likely many more--want to combine the chipset, a renaissance of the chipset market may ensue, he said.

"For the graphics guys, it's a matter of survival [to get into the chipset business]," he added.

Moreover, existing chipset vendors are coming at it from the opposite direction. Companies such as SiS and Via are now integrating graphics features into their chipsets, as is Intel, which announced its 810 chipset Monday.

McCarron says SiS chipsets--turf which Intel has dominated--have already been designed into consumer PCs from Compaq Computer, Hewlett-Packard, and IBM.

The ATI architecture, like other designs, steals some of the computer's main memory for graphics to save costs--referred to by ATI as Shared Memory Architecture, or SMA.

"By providing technology that previously required two discrete chips and following a shared-memory approach, ATI will offer PC [makers] dramatic cost reductions for low-end systems," ATI stated in a release.

"ATI's products will [work with] with Pentium II and Pentium III microprocessors as well as other processors," ATI stated.

ATI says this will provide an avenue into the very-low-cost PC market and consumer appliance space. The company said its product will be used in sub-$500 and sub-$800 systems.

ATI did not announce any specific products and did not disclose if it is partnering with any specific graphics chip maker.