This may have something to do with it...
"Intel Creates Turmoil in 3D Market
Intel is dumping I-740 chips on the Asian market and the impacts are
being felt throughout the 3D industry. The I-740 chip is being sold in
Asia in prices from $7 to $26. The lower prices come in bundling deals
with Pentium II, a BX core logic chip set and the I-740. The WAVE
Report has further confirmed that Pentium buyers are able to get more
favorable allocations of Pentium IIs when I-740s are purchased. The
large volume of I- 740s in the Asian market has depressed the prices of
the chips from virtually every 3D chip vendor. For example, the
WAVE Report learned that 3Dlabs Permedia II chips are going for as
low as $14. The prices for I-740 cards range from $38 to $55 for an
8MB version.
At the Computex show in Taipei, which closes on June 6, there is
much resentment against Intel. Some card vendors speak of their
complaints to Intel yet many remain silent in fear of not receiving the
Intel products they need to sell in conjunction with their motherboard
products. In the Intel booth there are 59 I-740 cards from 45
companies. This does not tell the full story as other companies selling
I-740 cards are on the show floor. Margins are razor thin and
companies have told the WAVE Report they are making from $.50 to
$1.00 per card when they can sell them.
One result of Intel's actions is a glut of 3D accelerators. When nothing
is moving the parts pile up. This ranges from the stock of chips at the
3D accelerator chip companies and extends throughout the distribution
chain to the retail level. The channel is stuffed to saturation.
The combination of the poor financial condition of the Asian market
and the glut of accelerators means that most companies making
motherboards and graphics accelerators are not making money. One
vendor we spoke with stated that in the last 2 months the situation has
worsened and it remains unclear when it will improve.
3Dlabs is the first company to report on the impacts of the Asian
market. We expect that more will report on the combination of Intel's
actions and a weak overall market.
The impact of Intel's presence goes beyond the I-740. Many of the
motherboard companies have motherboards which support Slot 1 and
the EX chip set. This is targeted to receive the Celeron processor as a
Segment 0 all-Intel solution. Yet, when the WAVE Report spoke to
companies with these motherboards, not a single one stated that this
would be a successful product. The uniform response, when they
would respond, was " this is a product to keep Intel 'happy.' "
The number of I-740 units moved as a result of this strategy remains
unclear. One source indicates that the largest seller of I-740 cards is
moving 50,000 units a month while another strongly disputed such a
number as being to high. They felt that there are from 3 - 4 companies
moving on the order of 30,000 units a month. We estimate that Intel
may have moved upwards of 1m units in Asia. This seems small when
Intel's run rate for the I-740 is estimated to be 6 million units in 1998
and there are indications its sales goal is 10m units. The core issue is
that the I-740 is being seen, especially in light of the newer 3D parts
coming to market, as an old stale part. Thus, while Intel fails to gain
large OEM orders in the U.S. it is increasingly left holding the bag full
of I-740 parts. Now, in Asia, with the channel saturated, it has few
options other than to drive the price of the part down further. One
wonders - where is the bottom and how much is Intel willing to lose on
the I-740?
It remains a mystery why Intel would engage in such destructive
actions. Clearly Intel is seeking to increase the sales of Pentium
processors and the linkage with the I-740 is one way. Yet, we see this
as only a near term gain. The I-740 is a transitory part with only a
limited lifetime and there is every indication that its end is near. Yet, the
feedback we get is that 3D chip buyers are not impressed with the Intel
3D roadmap. Just as S3 faced the consequences of stuffing the
channel in Asia with its Virge parts Intel is approaching that same stone
wall.
The core issue Intel faces is that its lock on the microprocessor market
is weakening. The key reason is its lack of competitiveness in price
sensitive markets, of which Asia is at the epicenter. At Computex
AMD rolled out SuperSocket 7 and IDT announced its WinChip 2.
There was no doubt about the warm reception that these
announcements received. On the show floor the buzz is about how to
reach the $399 PC price point by Christmas. Intel cannot play in this
space. When Intel seeks to leverage its presence in this market with
I-740 deals it is only one symptom of the larger problem. Its
dominance of the market, in Asia, which has been defined by high
priced processors is coming to an end. In the process, as its
microprocessor market share declines, it is reeking turmoil in the 3D
market. Hardly a long term strategy but more one of desperation. Intel
is creating its own strategic inflection point in the graphics chip market.
"
pixel.weezy.com
Omid Rahmat's take on the news. Quite curious.
jpa.com
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