Technology - PC World
Future XBoxes Will Use ATI Graphics
Thu Aug 14, 3:00 PM ET
Tom Krazit, IDG News Service
ATI Technologies has secured a "future technology agreement" for upcoming versions of Microsoft's XBox (news - web sites), taking over the business formerly held by rival graphics vendor Nvidia, ATI has announced.
ATI will license graphics technology to Microsoft for the next version of the XBox, says Chris Evenden, an ATI spokesperson. Microsoft will attempt to surpass gaming console leader Sony Computer Entertainment's Playstation 2 (news - web sites) with the next generation of the XBox. The Xbox has overtaken longtime gaming company Nintendo (news - web sites)'s GameCube, but trails Sony among console gamers.
Financial terms of the deal were not disclosed, Evenden says.
Nvidia Backs Out
Nvidia had recently signaled the company wouldn't be interested in pursuing the next-generation XBox business, says Jon Peddie, principal analyst for Jon Peddie Research. The company recently said it was looking to cut costs, and a number of industry observers have indicated that Microsoft was looking for another partner, Peddie says.
Microsoft and Nvidia have sparred over pricing issues since their initial agreement was signed in 2000. The companies brought in an arbitrator in 2002 to hear a dispute over the price Microsoft pays for Nvidia's chips. But they agreed to settle their differences in February, and talked of a future partnership to reduce XBox costs.
At one point in 2002, Nvidia was also left with a sizable amount of unusable inventory after Microsoft changed the security settings for the XBox, forcing Nvidia to absorb that cost. ATI will not carry inventory for Microsoft, Evenden says.
Graphics Roulette
Sony and Nintendo have both designed their own graphics controllers for their consoles using intellectual property from other companies, according to Peddie. In fact, Nintendo uses ATI's technology in the GameCube, an arrangement Microsoft was aware of as it evaluated ATI's technology, Evenden says.
Those companies have greatly lowered the cost of their graphics engine with the strategy, but the approach can be tricky, Peddie says.
"By going for an intellectual property deal, Microsoft now has to get involved with the fabs and integrated circuit design. Although the company has had experience doing things like that with its WebTV box and its set-top box, they may or may not have a team in place ready to go quickly. Building and testing high-performance integrated circuits at 0.13-microns or better is really tricky stuff," he says.
Microsoft would cut their overall costs, but would "take on quite a burden of technology management," Peddie adds.
Nvidia will continue to supply XBox graphics chips for the current generation of the console, the Microsoft spokesperson says. An Nvidia representative did not immediately return calls seeking comment.