ATI Technologies Inc. is expanding beyond its graphics business to go after the integrated chipset market.

At the German trade show CeBit, the Thornhill, Ont.-based company Wednesday said it will deliver five IGP (integrated graphics

processor) chipsets beginning in May. The chips will be available for Intel and AMD processors for both desktop and notebook machines.

Integrated chipsets are the combination of a discrete chipset with a graphics processor, and shared memory. For its IGP line of products, ATI will use its Radeon 7000 technology as a graphics core.

“”We are taking our discrete chipset and ATI technology to reduce the footprint,”” said Rajesh Shakkarwar, ATI’s director of marketing, based in Santa Clara, Calif. Integrated chipsets are also cheaper for OEMs to manufacture, he said, and their simplicity translates into reduced engineering and customer support costs.

Integrated chipsets are now in half of all PCs manufactured, according to Mercury Research analyst Dean McCarron, so it has become important for ATI to get involved in this market. “”Essentially their market got cut in half,”” he said. “”By getting into integrated chipsets, they’re really expanding the markets they can tap into. It makes a lot of sense for them to do this.””

ATI has been working on integrated chipsets for more than a year, Shakkarwar said. The company wanted to build up a sufficient portfolio of products to be competitive from the get-go. “”Colin Powell says, ‘Use disproportionate force to win a war.’ That’s what we’re doing,”” he said.

The number of chips launched at once is quite unusual, said McCarron, who predicts ATI should experience some success in the market. “”ATI is going to be one of the few companies that will cover essentially every variant (Intel and AMD for desktops and notebooks). They’re in a small camp with respect to that.””

While later to the integrated game than chief rival NVidia, MicroDesign Resources analyst Peter Glaskowsky agreed that ATI can be competitive. However, the IGP line will not be a cash cow for the company. He stressed that ATI will have to invest a lot of time and money recruiting OEMs for its chips — so far the only OEM it has named is Fujitsu. Moreover, dedicated graphics chips will remain ATI’s biggest sellers.

Glaskowsky estimates that profit from ATI’s Radeon 8500 could be on the order of 10 times that of an integrated chipset. “”The best ATI can hope for is that they’re going to increase their gross revenue by 50 per cent or so and their net profit will increase to a much smaller extent,”” he said. “”This stuff is just inherently less profitable than the high-end graphics chips.””

Shakkarwar said ATI is going after consumer and commercial segments with its IGP products, but admitted they won’t be able to deliver the raw graphics power of a discrete chip. “”New chipsets cannot compete with Radeon 8500 as far as games are concerned,”” he said. “”A Radeon IGP will be able to play any game, but serious gamers will use a Radeon 8500.””

ATI’s IGPs will feature Hyper Z technology to ease memory bandwidth limitations and FlexFIT Universal Platform Architecture which, according to Shakkarwar, allows OEMs to design products for all market segments by standardizing on a common motherboard design.

The IGPs will also use USB 2.0 controllers rather than Firewire. “”I think it was really important for them to do that,”” said Glaskowsky. “”This keeps them from being a generation behind in that respect, and it gives them something they can use to sell the chipset.””

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