Here is today's IBD article on 3-D market.
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.'' |
