Turning Point.(Industry Trend or Event)

The turn of the century marked a turning point in the workstation graphics board market. Well-known companies vanished, new ones appeared, and new price-performance points were established. But while CPUs jumped in performance, memory speeds increased, and new acceleration features and functions were added to graphics add-in boards (AIBs), the benefits of high-performance workstations became as confusing and controversial as ever.

In the past two years, nothing seemed to stand still or remain the same. SGI abandoned graphics chip development for the desktop and worked out an arrangement with Nvidia for workstation graphics. Intense3D was acquired by 3Dlabs. Nvidia acquired the software team and OEM clients from Elsa. SGI acquired Intergraph's workstation group. Evans & Sutherland pulled back from developing workstation AIBs and chips. HP reorganized and consolidated its workstation divisions. NEC entered the market with a powerful AIB. ATI acquired the FireGL division of SonicBlue (formally S3). Three innovative chip design groups (PixelFusion, Raycer, and Philips' SP3D) pulled out without completing their designs (Apple picked up the Raycer team, PixelFusion moved to communications). SGI enhanced its Octane systems. Sun introduced a low-cost range of products. And HP enhanced its fx graphics.

The net result of all the assimilations, acquisitions, and mergers, was a 29 percent drop in the total number of suppliers of workstation graphics AIBs and chips during 1999, followed by a period of equilibrium during the past 18 months, when as many suppliers entered the market as dropped out. However, the recent stability is like the quiet before the storm. Given the imbalance in the number of suppliers per units sold and per revenues, especially compared to the ratios in the PC market, there will be more casualties.

The primary driver of this upheaval will be the continuing migration of low-cost, reasonable-performance hardware from the PC market, which is squeezing the profitability from the business models of professional graphics hardware vendors. The migration of low-end graphics into the workstation market has largely taken place in the Windows ...