From IBD.
Chip Firms Plot
Strategies To Crack
The 3-D Market
Date: 1/23/97
Author: Reinhardt Krause
Chipmakers are rushing to a new
personal computer gold mine:
three-dimensional graphics. It's still a
question, though, how many will strike it
rich.
Making 3-D graphics more realistic is a
big goal of PC makers. To lure more
game players away from game machines,
they want fast-moving, jazzy images.
And 3-D graphics opens up other
entertainment, too. More Web sites on
the Internet are being designed with
interactive 3-D.
Plenty of 3- D chips are ready to go.
These chips work in tandem with
microprocessors to speed up graphics.
But that's not enough. Before splashy
3-D graphics can help drive consumer
PC sales, other parts of the puzzle need
to fall in place. Widely supported 3-D
software tools are still lacking, for
example.
Will all the pieces come together for the
holiday PC season in late '97? That's still
a question mark. The last two years have
been duds.
And unless it's showtime for 3-D
graphics soon, things could get dicey for
some chipmakers. It's hard to make
money these days on less-complex 2-D
chips as their prices fall.
Also, the 3-D market already is getting
crowded. ''For many of the
(chipmakers), if they're ahead of the
curve, 3-D is an opportunity. For the
ones coming in a little later, it's a must-do
in order to survive,'' said Elias Moosa, a
financial analyst at Robertson, Stephens
& Co. in San Francisco.
Between seven and eight million 3-D
chips shipped worldwide in '96,
according to Jon Peddie Associates Inc.
The Tiburon, Calif.-based market
research firm had estimated that 10
million would ship.
''The consumer (3-D) market has failed
to materialize two years running now,''
says Osman Kent, president and CEO of
chipmaker 3D Labs Inc., San Jose,
Calif.
This year looks better. Shipments of 3-D
chips could grow to 27 million to 30
million units, says industry analyst Jon
Peddie. But the numbers are misleading.
Many of the 3-D graphics chips sold so
far offer only slightly better performance
than 2-D chips. Rolling out very
expensive chips is a risky proposition for
graphics chipmakers.
True 3-D graphics involves real-time,
life-like motions. Creating 3-D objects
requires complex shading and texturing,
which control the detail of scenery. The
real 3-D chip age won't start until
consumers are willing to pay for it. That
day won't be here until more PC game
titles or 3-D applications arrive.
''What's happening is that the chip guys
are trying to build an installed base to
attract software developers,'' said
Peddie. ''That plays into a 'Field of
Dreams' scenario: If you will build it, they
will come.''
In '96, most 3-D game titles were
distributed directly with either PCs or
add-in cards. Consumers still cannot buy
a 3-D game title that will run on any PC.
One chipmaker that thrived in '96,
though, was Santa Clara, Calif.-based
S3 Inc. The company worked closely
with game developers to ensure that their
titles could run on S3's chips.
Smart move. S3 holds more than 50% of
the 3-D chip market, industry analysts
say. S3 this week reported that '96 sales
rose 47% to $465 million, up from $316
million.
Other top 3-D chipmakers include Cirrus
Logic Inc., based in Fremont, Calif., ATI
Technologies Inc. of Toronto, and
U.K.-based VideoLogic Group PLC.
Second-tier 3-D chip contenders are
Sunnyvale, Calif.-based Oak Technology
Inc., Mountain View, Calif.-based
Trident Microsystems Inc. and Newton,
Pa.-based Tseng Labs Inc. Two
newcomers with 3-D chips are start-ups:
Rendition Inc., based in Mountain View,
Calif., and 3Dfx Interactive Inc, based in
San Jose, Calif.
However, many chipmakers are
frustrated with market stumbling blocks.
They say game makers need widely
supported 3-D software tools before the
market for 3-D devices will take off.
3D Labs' Kent says that Microsoft
Corp. has been late in coming out with
new versions of software, called Direct
3D, that makes it easier to create game
titles that run on PCs.
In February, Microsoft is bringing game
developers together. It held a similar
design conference last year. By
Christmas, the software giant finally
expects more off-the-shelf game titles to
be available.
But to display dazzling 3-D images, PCs
need other improvements.
Computer memory is one bottleneck.
Fast-paced 3-D graphics requires oodles
of memory.
So Cirrus is turning to a new memory
type, says George Alexy, vice president
of marketing. Cirrus' 3-D chips are
packaged with memory chips licensed by
privately held Rambus Inc., Mountain
View, Calif.
Santa Clara, Calif.-based Intel Corp. is
active on the 3-D front, too. With its new
MMX microprocessor technology, Intel
is taking over some of the load for 3-D
processing. Intel also has developed a
new PC interface called advanced
graphics port.
The AGP interface makes better use of a
PC's memory to speed up graphics. Intel
also is cooking up its own 3-D chip,
which is being developed with Lockheed
Martin Corp., Bethesda, Md., and Chips
& Technologies Inc., San Jose, Calif.
The current word in the chip industry,
though, is that both AGP and Intel's chip
won't be shipping in volume until '98.
Intel officials insist that the interface and
the chip will be in production late this
year.
For other graphics chipmakers, any Intel
delay is a plus. But analysts say that
despite its power, Intel will have to fight
for a share of the graphics chip market.
''I don't expect them (3-D incumbents) to
roll over,'' said Krishna Shankar, a
financial analyst at Donaldson Lufkin &
Jenrette Securities Corp., New York.
''There is plenty of room for innovation
with 3-D graphics chips.'' |
