A few years ago the growing notebook market spawned a cottage industry for the channel in upgrading their less-than-stellar integrated graphics chips.
They were either part of an Intel chipset or the motherboard and lacked the type of horsepower necessary for playing serious video games or making a key multimedia presentation.
The channel filled this hole by upgrading road warriors or professionals with desktop replacement-type notebooks with discreet graphic chips from ATI Technologies of Markham, Ont. or NVidia from Santa Clara, Calif.
For years system builders have been customizing white box PCs with high-end graphics cards from ATI, NVidia and Matrox.
Then as the build-to-order notebook market started to grow, system builders began to integrate graphics chips on notebooks.
The market for discreet and integrated graphics chips ballooned along side the growth in notebook sales in Canada and the U.S.
The number of U.S. households owning notebooks will more than double by the end of this decade, while the Canadian market held its own with a 53 per cent increase year-over-year, according to Evans Research Corp.
But this market success will pale in comparison to when Microsoft releases its much anticipated Vista operating system later on this year.
Vista promises to be a 3D operating system, which means software developers are currently scrambling to release 3D versions of their software packages for the new OS.
Meanwhile, Intel and AMD are ramping up their new chip platforms to provide the extra horsepower needed for Vista.
But executives at the two largest graphics chip companies believe it will not be enough.
“We see (Vista) as an opportunity for notebook graphics,” said Ravi Kaushik, NVidia’s product marketing manager of the notebook graphics business.
“Finally there is an application that mandates 3D, and that application is the OS. Before it was the gamer and now more business applications will be using 3D. The end-user will need more graphics and Microsoft is already pushing higher-end SKUs with graphics.”
Gary Kaplan, notebook marketing manager for ATI, agrees, saying Vista will boost the discreet graphics business over the integrated graphics side, especially early on.
“We are doing well in the mobile discreet market, but what is going to drive new business opportunities is Vista,” he said.
Vista will bring about a whole new horsepower requirement from the graphics chip, Kaplan said. He believes this will only increase the discreet area of the mobile graphics market even further.
ATI currently has 72 per cent of the discreet mobile graphics market, which does not count those chipsets integrated into notebooks.
Kaplan also believes that Vista will drive up average selling prices for ATI and its channel partners.
ATI is already poised for Vista and is readying its Radeon line of products for the OS’s launch this fall, Kaplan said. ATI products will also be ready for Intel’s CPU refresh code named Merom, Kaplan added.
Kaplan believes the channel will play a more significant role than ever before. He said with Intel pushing white books and its lack of discreet graphics chips, the market will go to the channel for these products.
Jon Peddie, market analyst at Jon Peddie Research in Tiburon, Calif., said both ATI and NVidia have shown to be very aggressive in this market. ATI, he said, has the largest market share, while NVidia just acquired Uli Electronics, a developer of core mobile graphics logic for a mere $52 million.
“The introduction of Vista in Q4 of this year will provide the pop in the curve for discreet graphics in desktop and mobile with the extra performance it can apply. We think that type of demand for early adopters will make extra dollars for the next two quarters,” Peddie said.
The Uli deal
The Uli deal will also further AMD in the market as its partnership with NVidia helps Intel’s main rival to integrate and optimize its chips with a single graphics motherboard.
NVidia went one step further by developing a new standard for mobile graphics called Mobile X (the X stands for PCI Express) Module or MXM. This standard, according to Kaushik, was specifically designed for custom-built notebooks.
“Customers are seeing the value in customized notebooks built by VARs over Dells. The channel guys are more focused, we are getting more pull and NVidia is committed to fostering this channel market and growing it. A few players controlling the market is not good for the whole market.”
The problem facing the channel and vendors such as NVidia and ATI is the notebook’s size. Because users want thin and light laptops, there will be a need for graphics chips that give the best performance per watt, said Kaushik.
“Notebooks are getting slimmer and that means the power is fixed, and if you go across the thin and light segment you can only do so much with wattage,” he said. Desktops do not have this problem because of bigger headroom. Kaushik said that NVidia designed its GeForce Go 7 Series along these lines.
Kaushik believes Vista, along with NVidia’s product line, will be lucrative to the channel because the early adopters will be consumers, home office and small-to-mid-size companies. Corporate and enterprise customers will wait until the end of leases to acquire new systems from tier 1 manufacturers.
New drive drivers
Besides Vista, HD-DVD and Blu Ray technology will also further the mobile graphics market.
Kaushik said both disk technologies will be a market initiator for mobile graphics, especially in 2007.
“Blu Ray and HD-DVD are costly technologies today and meant for high-end notebooks, but in the second half of next year they will have some market penetration,” Kaushik said.
He believes these drives will account for about 20 per cent of sales over the next 18 months.