They opened a rich multimedia landscape for hundreds of OEMs to exploit, but after leading a renaissance in the consumer-PC space, low-end graphics processors are facing the inevitability of integration.
Pricing pressure at the bottom of the PC spectrum, and the growing importance of the core-logic chipset as a command-and-control center, have led designers to pull a wide menu of functions into a single piece of silicon-and graphics ICs are proving no exception.
Last week's departure of Intel Corp. from the discrete-graphics market punctuated this trend, as the company said it will drop its stand-alone development efforts, but continue to combine 2D and 3D imaging technology with its core-logic chipsets.
While Intel is the highest-profile graphics-chip developer to embrace this form of integration, it's not alone. Trident Microsystems Inc. is leaning in the same direction-and with Nvidia Corp.'s decision last week to partner with Acer Laboratories Inc., virtually every graphics-chip company is adapting to the new market reality.
Observers said the reversal of strategy is being driven by the low end of the PC market, which can't tolerate the added cost of a stand-alone graphics chip. To stay competitive, IC makers must deliver performance high enough to justify the premium.
"The reason [for Intel's departure] is that the trend toward integration is clearly happening, and that segment of the market is very cost-sensitive and not very performance-sensitive," said Dean McCarron, an analyst at Mercury Research Inc., Scottsdale, Ariz. "The problem is that there is no middle ground."
Indeed, analysts say maintaining a foothold in the discrete-graphics market is like climbing a waterfall: If they scramble hard enough, chip makers can eke out a living designing leading-edge parts. But a stumble of any kind, and vendors risk falling into the mass of IP that's already been pulled into the core-logic maelstrom.
According to Mercury Research, suppliers will ship more than 123 million discrete graphics ICs this year. That number will drop to fewer than 87 million next year, while shipments of chips with integrated graphics functions will increase from about 11 million to more than 43 million.
Intel confirmed that it will not be entering volume production with either the Intel 752 or Intel 754 graphics accelerators, both of which are successors to the company's only stand-alone desktop-PC graphics chip, the i740, which was phased out earlier this year. An Intel spokesman said the company is "going with the graphics trend toward integration," at the request of its PC OEMs.
Intel declined to comment on the fate of other next-generation discrete desktop graphics chips, code-named Capitola and Indian Beach, or whether it might return to the market at some point. The company also deferred questions regarding the future of its mobile graphics chip, Descanso, which is expected in the first half of next year.
Trident executives, meanwhile, said their stance toward stand-alone graphics chips also has shifted. "Intel's actions fundamentally endorse what we have pioneered," said Gerry Liu, senior vice president of marketing for the Mountain View, Calif., company.
While Trident continues to sell discrete notebook-PC graphics chips, it has also inked deals with Acer and Via Technologies Inc. to combine its graphics technology with logic cores for the low-end desktop and mobile segments. So where do suppliers draw the line between discrete and integrated devices? There appears to be no clear answer.
A spokesman for S3 Inc., Santa Clara, Calif., said the company is planning integrated chipsets for desktop and mobile PCs, but also will ship stand-alone parts such as the GX4 device to be unveiled next week.
According to Phil Eisler, vice president of component marketing for ATI Technologies Inc., Thornhill, Ontario, stand-alone graphics-chip performance has increased 500% this year alone, and ATI will maintain a high-performance discrete chip line even as it adds integrated chipsets early in 2000.
Stand-alone graphics chips must continue to at least double the performance of integrated cores to justify the price premium, Eisler said. "The challenge for integrated [chipsets] is how to close that gap."
According to Intel, there were no performance concerns contributing to the discontinuation of the 752 and 754. The company said it will now concentrate on developing the Intel 810, Intel 810e, and future chipsets that combine the company's graphics cores.
The price of Intel's discrete graphics chips were falling into the range of the Intel 820, which will be rolled out next week, and combines the Intel 754 graphics core with core logic, noted Jon Peddie of Jon Peddie Associates, Tiburon, Calif. "OEMs are driving these changes, and they're trying to use them to differentiate their products," he said. "The ironic thing is that there are only a few applications-and when I say a few, I mean less than 12-that take advantage of the features included in these new [discrete] chips. But, if you don't have the performance, you're not in the race."
For all Intel's clout, the chip maker trails well behind established graphics vendors such as S3 and ATI, according to Mercury Research. Intel sold 1.4 million stand-alone desktop graphics chips in the first quarter, finishing seventh with about a 5% market share. Trident ranked one notch below, selling 900,000 chips for about a 3% share, according to Mercury Research.