ATI..............
From the Semiconductor pages of Electronic News: November 16, 1998 Issue
ATI's Consumer Push
Graphics firm makes bid to diversify
By Peter Brown
Toronto--Graphics accelerator market share leader ATI Technologies will today continue
its major thrust into the consumer electronics market as it introduces the ATI-TV Wonder
add-in board designed to bring television broadcasting to the PC.
The move by ATI is not an unfamiliar one. Over the past few weeks, the company has also
thrown its hat into the set-top box video and TV markets as well as the digital television
(DTV) market. ATI's consumer push comes on the heels of the most profitable fiscal year in
the history of the company, as it earned more than $800 million in revenue through its
graphics IC and board business.
However, with the advent of the sub-$1,000 PC market, margins are continually being
driven lower for the company and for that matter every graphics IC company. In a bid to
keep its revenue growing, ATI is diversifying into the consumer electronics market.
ATI is taking an approach that some industry observers believe may work well for the
company, staying close to its flagship business and only having to tweak and adjust its
current parts to move them to the consumer segment. ATI is also tackling the PC/DTV
space that looks to provide some early revenue returns. Although this market may not
provide significant revenues in the long term (see related story, pg. 27), ATI may be able to
capitalize on what little market there is in the short term.
Grappling In Set-Tops
The company is also grappling in the highly contested set-top box arena for digital television
and satellite broadcasting design-ins. But ATI has already made inroads there. Recently, the
company signed an agreement with General Instruments (GI) to supply the consumer
electronics OEM with 5 million units of an enhanced Rage graphics accelerator specifically
targeted at the Windows CE market.
"Everyone talks about the convergence of technology but ATI is actually doing something
about it," said Scott Hudson, senior analyst at In-Stat in Scottsdale, Ariz. ATI seems to be
staying focused on graphics processors even when they extend these processors outside the
mainstream 3-D realm, he noted. "It seems the strategy is well thought out and it is certainly
the right time to be doing these exploratory market movements when the company is on top,
when they are number one," he added.
The ATI-TV-Wonder add-in board is said to provide TV on a PC features with video
capture for any PC equipped with that graphics board or IC. The card plugs into any PCI
slot without the need for additional connectors, the company said. ATI is targeting the TV
Wonder board at the sub-$1,000 PC market where, ATI claims, a combination of TV tuner
technology and 3-D graphics can give the PC a digital-VCR feel. ATI is offering the
TV-Wonder add-in board for $99, a price point that is very competitive for both the CE
and PC markets.
This price is also compared to thousands of dollars that many consumer electronics OEMs
are seeking for digital television sets or the hundreds of dollars for a potential set-top box to
carry these signals, noted Mr. Hudson. Considering this, it may be a sure way to spark the
market for digital television and at the very least introduce PC users who want to watch TV
on their PC to digital television, he added.
Maintaining Focus
ATI is looking to maintain its focus by diversifying into like products where it does not have
to spend engineering resources developing a new line of chips. Instead it can take already
developed chips for the graphics market and apply them to the CE market with a few added
features or tweaks to an existing chip.
Over-diversifying caused companies such as S3, Cirrus Logic, Oak Technology and other
graphics vendors to lose their focus as they tried to concentrate on too many markets at
once. This, in turn, caused them to lose market share and much of their revenues as well. S3
recently was a $500 million company but now is pushing just over the $100 million mark and
has divested itself of all of its business except graphics where it made its money.
Similarly, Cirrus Logic recently completely exited the graphics market and other markets
taking a $500 million charge to its business. ATI hopes to avoid the situation these other
companies found themselves in by focusing on markets closely tuned with graphics:
PC/DTV, set-top boxes, and tuner cards for generating TV broadcasts on PCs.
ATI also last month rolled out what it calls the Rage Theater chip targeted at OEMs that are
manufacturing set-top boxes and PC products that need video-in and TV-out display
capabilities. ATI claims the Rage Theater allows for digital clear video images for the PC
from analog video sources such as a VCR, camera or tuner. The Rage Theater chip is
priced at $18 in 10,000-unit quantities with production slated to begin in January of next
year.
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