An article off the Forbes web site (http://www.forbes.com) of December 30, 1997.
This is an interesting site, btw.
Ski
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ATI Technologies: Chipping Profits
By Om Malik
Videogames like Quake, Myst and Riven are the hottest stocking stuffers this holiday season, but to get the gory blood-spilling details of Quake or the pixel-perfect beauty of Riven, you need your computer to see better. And that means getting a special graphics chip.
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Simply put, a graphic chip is the retina of a PC.
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Simply put, a graphics chip is the retina of a PC. It takes images and renders (or displays) them on the monitor. The better the graphics chip, the higher the quality of the image.
There is plenty of demand for faster graphics chips. According to Mercury Research, a Scottsdale, Ariz.-based market research firm the demand for graphic chips will rocket from $1.4 billion in 1996 to $2.5 billion in the year 2000.
One company that is pummeling the competition is Toronto-based ATI Technologies. Founded in 1985 by Chinese immigrant and engineer, K.Y. Ho, ATI has leapfrogged over rivals in a crowded market. At last count there were 40 companies duking it out for market share, but this is an arena where the top 4 players--S3 (SIII), ATI Technologies, Cirrus Logic (CRUS) and Trident Microsystems (TRID) own 80% of the market.
But don't expect ATI to brag about its success. Despite the long years in Canada, and the company's knockout performance, Ho remains very shy when it comes to talking to nonengineers.
Building a better chip
<Picture: I>n videogames, as in life, action speaks louder. Just last August ATI brought out a new graphic chip called Rage Pro, which could, for example, bring Tomb Raider's Lara into sharper focus. No more crude video playback and broken lines. A complete 3D Rage Pro graphics board costs upwards of $150 apiece, and is normally installed by PC makers.
Even better, Rage Pro conforms to the Accelerated Graphics Port (AGP) standards introduced by Intel, especially with its Pentium II class chips. AGP is like a traffic cop, which controls and maintains high-speed data flow between main memory, the chipset, and the computer's graphics chip. This improves the graphics performance of a computer, and as a result, newer chips like Rage Pro can finally deliver optimal performance. Since its introduction, 3D Rage Pro has been adopted as a standard feature by the top ten PC makers like Dell, IBM, Hewlett-Packard and Compaq. Next spring ATI will introduce a new version of the Rage Pro, which will be three times more powerful.
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3D Rage Pro has been adopted by the top ten personal computer makers.
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"We have always played in the medium end of the market, but with Rage Pro, we went straight to the high end," says Phil Eisler, director of component marketing, who acts as Ho's spokesman.
ATI has seen its revenues jump 29% to $445 million in fiscal 1997 (ended August 31), but more significantly, profits jumped 76% to $35.5 million.
It is a tough market. Take Cirrus Logic, which was the leader in 1995, controlling 33% of market share, but which has since seen its dominance dwindle to only 9% of the market. Why? Cirrus Logic never produced a chip targeted at the upper end of the market that could do what Rage Pro does. In that same period, ATI boosted its overall market share to 13% from 8% in 1995. By the end of 2000, the company hopes to capture 40% to 50% of the market, Eisler says.
To control that much market share, the company needs to stay focused on its research because the industry's technological bar is constantly rising. While, according to Moore's Law, the power of processor chips doubles every 18 months, graphics chips get eight times faster in the same period, due to a large number of competitors in the field. In the second week of December, ATI paid $3 million to acquire all the graphic design assets of beleagured competitor, Tseng Labs.
But Ho is also looking for opportunities outside the gaming industry. In December, ATI released a new graphics board, a sort of one-size-fits-all for multimedia applications of a PC. Using this, you can use your PC to listen to FM radio, watch the latest CNN news, and play videogames--all at the same time. In addition, you can hook up your VCR to your PC, or watch DVD movies. The cost? $250 a board.
As long as ATI can keep coming up with these cutting edge products, it should be able to keep zapping its rivals. Without making much noise.
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