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Graphics chipmakers in new battle

A flurry of announcements presages yet another bruising round of competition for 3D chipmakers.

Graphics vendors unveiled new products and corporate strategies this week, in a flurry of announcements that presages yet another bruising round of competition for 3D chipmakers.

3Dfx yesterday rolled out a corporate makeover--backed by a Web site redesign and a $20 million ad campaign--designed to promote the Voodoo3, the company's latest graphics processor, and its new effort to get into graphics boards.

Meanwhile, archrival Nvidia said it would begin to ship its TNT2 in May, a 128-bit graphics chip with up to 32MB of dedicated memory. Diamond Multimedia has already signed up to include the TNT2 on graphics boards.

Also, 3Dlabs announced a new graphics accelerator card for entry level workstation PCs called the Oxygen VX1. The new board uses the company's new Glint R3 processor; it will be priced at $299, and will be available for starting in the second quarter of 1999. Driver software for the card, which is intended for systems which use the OpenGL application programming interface (API), can take advantage of additional processors in the PC to boost performance, the company said.

The run of announcements comes amid even tighter competition in the overcrowded graphics markets. Over 40 companies produce 2D and 3D graphics accelerators, far more than the industry can support, say analysts.

The sheer number of manufacturers has eroded margins for chip and board makers, and also accelerated the development cycle. Consumers are getting a lot for their money.

The difficulties of cracking such a market were demonstrated last year by Intel's struggle to win share for a relatively high performance graphics chip called the i740. Within a few months, competitors released faster chips, relegating the i740 to overseas bargain bins.

The current crunch for graphics vendors revolves around establishing a beachhead for the latest version of Intel's Accelerated Graphics Port, or AGP 4X. AGP creates a separate bus, or data pathway, for graphics traffic. Devising the best, or one of the better, solutions for AGP 4X motherboards can lead to lucrative contracts with computer vendors. Poor performance, on the other hand, can send a company into a trough.

S3's failure to latch onto AGP in 1997 led to a two-year decline in sales; by contrast, ATI Technologies became the No. 1 vendor on the strength of its AGP solutions.

Ironically, the race for AGP 4X is both urgent and slow. The TNT2 is one of a number of AGP 4X chips being released in the May time frame. Unfortunately for these companies, Intel's Camino chipset, which will enable computers to take advantage of AGP 4X, was recently delayed from June to September.

As a result, these companies will have to sell these chips as less expensive AGP 2X processors for the first few months. "There will be variants of their graphics chips that will take advantage of AGP 4X in the June time frame but no systems," said Peter Glaskowsky, graphics analyst at MicroDesign Resources

3Dfx is attempting to position itself as the company to watch in 1999. The company's Voodoo 2 processor solution has long been a favorite among gaming fans, inspiring a Macintosh-like devotion. Few computer makers, however, have incorporated the chip into their computers. Instead, 3Dfx sold its chips to board manufacturers such as Diamond, who in turn depended on sales through dealers.

The company is seeking to reverse that in 1999 with the Voodoo 3 and a new board strategy. Like ATI, 3Dfx will make both chips and boards and sell the entire solution to computer vendors. Combined with the sales strategy, the company is launching a massive advertising campaign aimed both at customers and manufacturers.

"3dfx has developed the strongest name in 3D graphics acceleration by creating leading technology, establishing allegiance among major game developers, and being the first to brand itself to end users," said Greg Ballard, president and CEO, in a prepared statement. "As the popularity of 3D expands, we will extend this very successful formula to reach consumers around the world."

Another company looking to land more vendor deals is S3. The company has signed over 32 deals with computer vendors and motherboard makers centering around its Savage 4 AGP 4X solution. There is no guarantee that these contracts will amount to design wins, but it's a start, analysts have said.

Landing deals will mean having to oust Nvidia and ATI from their position with computer vendors. The latter in particular seems to enjoy a strong position with manufacturers.