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Nvidia expected to show new chipsets

The graphics chip leader is expected to announce next week a new generation of nForce, its integrated product that combines graphics and chipset functions.

Graphics chip leader Nvidia is expected to announce next week a new generation of nForce, its integrated product that combines graphics and chipset functions.

Nvidia introduced nForce last year, after signing a deal with chipmaker AMD. nForce combines a chipset--which connects an AMD Athlon or Duron processor with other PC components such as memory--with a low-end graphics processor.

Nvidia has scheduled a press conference for Monday, at which it promises to reveal a new "digital media platform." Analysts said the announcement is likely to involve a new version of the nForce line, which is due for a revamp.

Mercury Research analyst Dean McCarron said changes in the new nForce are likely to focus on chipset functions--including support for new connection technologies such as USB 2.0--rather than graphics enhancements. "There are a number of new technologies that are making inroads in the market, and they have to incorporate those," he said.

Integrated chipsets that combine chipset and no-nonsense graphics processor functions appeared on the PC market about five years ago and have quickly become the preferred option for PC makers to handle both jobs in low-end PCs. About half of all PCs now ship with integrated chipsets, with the rest using traditional standalone graphics cards.

Intel is by far the largest maker of integrated chipsets, but other companies have gotten into the act. Nvidia rival ATI earlier this year unveiled a line of integrated chipsets with support for all major desktop and notebook processors from AMD and Intel.

In the absence of a licensing agreement with Intel, Nvidia has confined nForce to AMD processors. Peter Glaskowsky, editor in chief of influential industry newsletter Microprocessor Report, said he believes Nvidia would produce chipsets for Intel's Pentium 4 if Intel showed any willingness to sign a licensing agreement, especially since Nvidia has Pentium experience from creating chipsets for Microsoft's Pentium III-based Xbox game machine.

"From everything I've heard talking to people at Nvidia, I'm sure they'd do it in a flash if they could get a P4 license," Glaskowsky said. "I just don't think Intel wants them to do it. A chipset company has to be willing to serve a market that Intel can't serve and increase CPU sales. I don't think having an Nvidia chipset for the Pentium 4 would generate that many (Pentium 4) sales."

Integrated chipsets are tricky financial propositions for graphics chip makers. Profit margins are wafer-thin compared with those associated with the market for flashier standalone graphics processors, where a small but significant audience of gamers and other enthusiasts is willing to pay stiff premiums for the latest technology. Development costs involved in mastering chipset design are also high for anyone entering the business.

Glaskowsky said nForce has sold better than many expected and estimated Nvidia will begin making money from the chipset business with the second generation of nForce chips.

"It's always slow going when you first get into the chipset business," Glaskowsky said. "There's always a lot of new stuff you have to learn. You've got to put of ton of money into that product line for a couple of years before you see any profit on it."

The advantage of having both chipset and standalone graphics products is that the chipsets allow a graphics chipmaker to squeeze more life out of investments in graphics technology, McCarron said. Nowadays, flashier, standalone graphics chips become obsolete quickly. But the integrated products tend to have legs.

"The old model was that they'd introduce a product at the high end, and over time it would filter down to the midlevel and then to low-end products...so they could amortize their investment," McCarron said. "Now they have to get their investment back over a much shorter time. It's difficult when you get into an environment where your product lasts only 18 months.

"Integrated graphics lets them get back into more of that original time frame," McCarron said. "It's a more stable market. The products just have a much longer lifespan."

Both McCarron and Glaskowsky expect the market to remain at a 50-50 mix between integrated chipsets and discrete graphics cards, with chipsets the standard for low-end PCs. Integrated chipsets typically sell to PC makers for about $30, about the same price as a low-end graphics card.

"You're pretty much getting the chipset (part) for free," McCarron said. "For an OEM (original equipment manufacturer) that finds that level of graphics performance acceptable, its pretty much a no-brainer."