MS unveils its silicon implants

Software behemoth Microsoft changed direction last week as it announced plans to design graphic chips.

Silicon designers will build a microchip which will accelerate PC displays under the scheme, codenamed Talisman, turning them into the equivalent of high-end workstations. It will take two years to come to fruition with the first systems expected to be unveiled towards the end of next year.

The devices will bring three-dimensional images to the screen at high speeds.

But the project, which Microsoft attempted to keep under wraps for the first half of this year, intensifies rumours of disagreements between Microsoft and chip giant Intel over the future of technology.

While Intel achieves profit margins of around 50 per cent on its products, insiders at Microsoft say it only makes around 17 per cent per PC.

As design capability is a function of software rather than hardware, Microsoft will probably contract the fabrication of the chips to someone else even if it successfully designs the graphic devices itself. Microsoft margins would be hit if it invested in a fabrication plant.

But OEMs are unlikely to be happy with Microsoft's plans. If it releases software bundles that demand the performance of Talisman, it will mean they will have to sign deals to license hardware components as well as the operating system software.

Intel, too, is likely to do its best to thwart Microsoft's plans behind the scenes because it has its own plans for multimedia and hi-resolution graphics processors.