For a long time the graphics market was asleep. Five years ago, watching developments in this market space was the IT equivalent of watching 24 hours of Big Brother. NVidia and ATI were doing their best Intel/AMD impressions and there was not a lot to talk about in terms of competition.
NVidia was dominant in desktops - the biggest and most profitable sector - and ATI held the high ground in the notebook space. ATI lacked the technological edge it needed to make a real difference to nVidia's dominance in the PC sector.
Fast-forward five years to a much-discussed auction on eBay, where a bizarre bidding war was rumoured to be under way, in which ATI and nVidia were offering millions of dollars for the bundling rights to an eagerly awaited game.
Suddenly, the graphics industry, like an old graphics card, has been swapped out for a far leaner and more aggressive beast.
A lot happened in a short period, making 2003 the most hotly contested year in the sector since the 1990s, when there were numerous desktop chip suppliers.
UK broadline distributors, including Ingram Micro and Computer 2000 (C2000), were busy filling out their graphics card offerings, because this sector was one of a small number of PC-related businesses, including LCD screens and recordable DVD drives, capable of making people spend.
"We certainly saw good results from our graphics business, and with the new developments coming from card manufacturers it helped create a strong upgrade market for cards," recalls John Osborne, general manager of PC components at C2000.
"The arrival of ATI as a serious competitor to nVidia has made things a lot more competitive, which in turn has spurred the need to create more products."
C2000's decision to work with card manufacturer PNY Technologies since the start of 2004 shows how seriously the distributor wants to increase its share of the market. PNY currently leads the UK retail sales charts, according to ChartTrack, with its Verto line of nVidia-based cards.
It is also the exclusive worldwide supplier of nVidia's Quadro FX professional graphics cards. Despite entering the market as recently as 2002, aggressive marketing and key distribution deals with retail giant Dixons Group, as well as e-tailer Dabs.com and others, have shot PNY to the top.
"No two graphics cards vendors have the same offering, and as a broadline distributor we need to offer more than one vendor," says Osborne.
"PNY has a broad selection of products for the desktop, and the professional sector with its nVidia Quadro FX-based cards. The latter will tie in well with our AutoCAD business and the fact that PNY is the sole supplier was one of the main reasons we decided to go with the company."
Vicky Burgoyne, general manager at PNY UK, says: "In the UK we are running at about 70 per cent market share in the professional graphics arena. 2003 was a great year, and we've seen a lot of steady growth here.
"We've been trying to broaden our channels to market and that's where C2000 will help. It has a great database, covering everything from the Tottenham Court Road guys to the gaming resellers. Previously C2000 stuck with just one card supplier, Gainward, but the new management wants to broaden its offerings."
C2000 is already hunting for more card partners. "We are looking at other vendors and will be very interested in signing an ATI card supplier as quickly as possible," says Osborne.
Ingram is relatively new to the graphics card scene, having arrived in the latter half of 2003, but it has made inroads, signing deals with key player Gigabyte and new card vendor XFX.
"We entered quite late," says John Fitzgerald, general manager of the components division at Ingram Micro UK. "We had no real selection of offerings up until the middle of the year, bar our nVidia-based cards from Creative Labs, because we didn't have a team capable of handling new vendors back then.
"Then we signed XFX, which has really started to take off. Our aim in the components team is to appeal to as many independent system builders as possible. We have just taken on some ATI-based cards from Creative and are looking to add other ATI vendors. We are 99 per cent ready to set up a deal in the first quarter with a big ATI player."
So why has the once-humble graphics card - a price-sensitive and low-margin product at the best of times - suddenly become the darling of channel heavyweights that previously wouldn't have touched them with a bargepole?
The big changes in the marketplace can be attributed to the rapid advances in graphics chip technology and games development.
The development of graphics processing units (GPUs), or chips, used to be all about keeping pace with the development of CPUs from Intel and AMD. In the past couple of years, thanks to plenty of innovation, better manufacturing processes, faster memory and interface technologies such as AGP, graphics chip development has outpaced nearly everything else.
Graphics developers no longer wait for anyone; they are too busy breaking ground with new technologies. They also cleverly took a proactive role in working closely with leading games developers to create genre-breaking games that pushed the boundaries.
The term 'cinematic quality' is now bandied about as they strive to bring true realism to computer-generated environments. The more complex the graphics have become, the bigger the engine needed to drive them.
Not so long ago, the graphics performance of a PC was merely another component part of the system, along with hard drive, monitor, memory and CPU. A few years ago a typical graphics card would have come with 32MB of memory onboard.
Today it's 128MB or 256MB, the same amount of memory as many PCs - and all of it dedicated to graphics performance alone.
For a growing number of consumers the type of graphics card in a PC can swing the sale all by itself, indicating just how important the entertainment side of PC use has become.
"Three years ago you wouldn't have been writing about graphics at all; it was a very small part of the PC," explains Roy Taylor, sales director EMEA at nVidia. "It was a niche area of interest only to gamers. Most mainstream PC users would have had very little use for graphics power, but all that has changed now.
"The chances of a PC never being used to play a game now are very slim. In the past, PC manufacturers refreshed their systems based on CPUs; now they are refreshing their systems based on the latest graphics cards."
Europe has thousands of system builders that base entire systems around the latest graphics cards, because speed to market is one of their key advantages. For instance, last year German PC builder Medion sold 200,000 high-end PCs boasting the first high-end ATI Radeon 9xxx PRO graphics cards in a matter of hours, through the Aldi supermarket chain.
"System builders are looking to attack the vertical consumer market, and they are using the latest technologies, particularly leading-edge graphics cards, to do it," observes Fitzgerald.
"The PC's role has changed and the days of buying PCs for just surfing the net are long gone. End-users are a lot more savvy. They are second- and third-generation PC buyers who have moved beyond the whole price/performance argument."
Peter Stern, sales director at Realtime Distribution, adds: "The gaming market is a key reason why people buy machines now. Graphics cards are a key influence in the PC purchasing decision.
"With most of the other PC components it's pretty hard to differentiate between them, but with cards you can; they come in entry-level, midrange and top-end flavours, many with different features and bundled extras.
"Graphics card technology is now evolving more quickly than other PC technologies. Once graphics technology can represent real-life animations and true cinematic quality, development will slow down, but it's not there yet."
Taylor agrees. "Look at the transistor count in a GPU compared with a CPU - there's no comparison," he says. "If you spend $100 more on a GPU versus any other component in a PC it will yield you a lot more for your money. The rate of innovation is accelerating, not slowing."
But he does not agree that the rate of new chip launches is confusing for users or harming the market. "You can't buck the market," he says.
"If we launch a new product and people don't buy it then it will show us we are going too fast. Right now, every time we launch something new the interest levels grow, not diminish."
So how does the market lie? According to Mercury Research, the state of play in Q1 2003 saw nVidia at the top, with its overall share in desktop stand-alone, desktop integrated, portable stand-alone and portable integrated sectors growing.
ATI also grew. NVidia's share in the stand-alone desktop graphics market was 64 per cent, down one per cent from Q4 2002. ATI's share rose two per cent to 28 per cent. It was the reverse in the stand-alone graphics notebook sector, where ATI held 60 per cent and nVidia 31 per cent. In Q2 2003 the desktop figures stayed the same.
In the integrated graphics space for notebooks and desktops, Intel is the market leader.
The most noticeable changes wrought by the higher level of competition can be seen in the prices and transparency of offerings. Last year was one of the best years to be a consumer, particularly in the low and midrange markets, which are the real money makers for all graphics chip and card manufacturers.
High-end cards may get all the headlines in terms of tit-for-tat benchmarking but they are targeted at extreme gamers and leading-edge consumers, for whom money is no object when it comes to acquiring that little bit more pixel power.
Underneath this, however, is where the real war is being fought, across high street shops, the reviews sections of PC and gaming magazines, dedicated websites, in the channel and with system builders.
It also can be seen in the never-ending jostling and kowtowing of graphics-card chip and card makers to the big-brand PC vendors. A big deal there can result in a marked change in fortunes.
With ATI in the game at last, prices came under pressure in 2003 and started to fall. Suddenly, people were getting a lot more performance for their money in the entry and midrange market.
It also helped that users could look at the ranges from ATI and nVidia and compare like with like for the first time. Until last year, it was very difficult to know which nVidia card competed with which ATI card. Now there is less clutter and clearly defined ranges that can be compared by looking at the technical specifications and the price tag.
"2003 saw a harmonisation of product ranges between ATI and nVidia," says Stern. "Because they were so aligned people were able to see what was what between both lines, and consumers have not had to scroll through the reviews magazines to find out the difference.
"There was a lot of fighting in the low end and midrange - the main battleground. Keen pricing was very noticeable in 2003, and over the next quarter that will continue.
"ATI has had some extreme success in the marketplace, particularly in the midrange and high end, but nVidia still managed to sell more in the retail sector. ATI had more success with system builders, many of which took a long, hard look and decided to share their business out a lot more for the first time."
Burgoyne says 2003 was one of the hardest years in terms of competition. "From a manufacturing point of view the margins are not really great on consumer graphics, and when you have the middleman in there too, they are even less," she says.
"The distributor margin is not that big but we have a lot of pressure on us to keep that margin, something that's hard when up against the e-tailers, which always compete on price."
So, with prices tight and sales up, the graphics card arena is set for a turbulent time. It is expected that some of nVidia's key card manufacturers will also start making ATI-based cards, as the lure of new sales overcomes fear of falling out of favour with the chip giant.
The biggest technological change is expected to come in the form of the PCI Express interface, which will start to replace the slower AGP slot inside the PC towards the end of 2004.
As a result, a whole new generation of cards is expected to be unveiled throughout the year.
2003: A year of change and online auctions
The past year has been a turbulent one for nVidia, more so than for ATI.
ATI has been riding the crest of a technological wave that saw its graphics processors finally equal, and sometimes surpass, nVidia in performance if not the sales stakes.
Meanwhile, nVidia took a hammering in the press and from partners, as a result of a troubled changeover in its manufacturing process, which caused severe delays during the first quarter and Q2 of last year.
The year improved with new cards, but then came lots of public benchmarking quarrels, followed by a separate falling out with games manufacturer Valve, over the benchmarking and performance of nVidia's cards and drivers.
And to top it all off there was the incredible tale of the online auction, which, true or not, has passed into gaming lore. During the late 1990s, a PC game called Half Life became a classic and a bestseller. Half Life 2, from Valve, is now eagerly awaited by millions of drooling gamers.
Last year, Valve offered nVidia a bundling deal for Half Life 2 with new cards, but the price was apparently too high. So, as the tale goes, Valve - already unhappy with nVidia for other reasons - put the bundling rights up for sale online on eBay.
Bidding is rumoured to have hit $8m before nVidia bowed out and ATI suddenly emerged with the Half Life 2 rights. While everyone has refused to comment officially, no one has denied anything.
Does it really matter, though, if it's true or not? The point is that in just five years, the market sector that was less interesting than Pop Idol has been transformed into an IT version of Dallas, with backbiting, treachery, name calling, cut-throat pricing and tit-for-tat performance battles.
Computer 2000 (0870) 060 3344
Ingram Micro (0870) 166 0422
nVidia (0118) 903 3000
PNY Technologies (01784) 224 220
Realtime Distribution (01480) 435 881
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