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Graphics Adapters Business and Market Today

Throughout the last ten years graphics processors gained extreme amount of performance and features, but the market of discrete graphics processing units (GPUs) did not actually increase tangibly since the emergence of integrated graphics processors (IGPs) did not allow it to.

Now that the economic crisis is in full swing and it is likely that many will start to save on GPUs and buy IGPs, it is very interesting to know, what does the world’s second largest supplier of discrete graphics chips thinks on the matter and how it will act. Moreover, both ATI (AMD’s graphics products group) and Nvidia have to keep an eye on Intel, the king of IGPs, which is prepping its code-named Larrabee standalone graphics processor.

X-bit labs: How is the global economic crisis impacts AMD/ATI graphics cards business?

David Cummings: I think it is safe to say that most if not all semiconductor companies are feeling the effects of a global slowdown. We [AMD] recently (December 4th) updated our fourth quarter outlook, estimating that our expected revenue for the current quarter would be down relative to our third quarter. I can’t offer you more than that as we are currently still in our Q4 and will not be reporting our Q4 revenues until January 22nd, 2009.

X-bit labs: How do you think the global economic slump will affect further development of the market?

David Cummings: Given recent history, slowdowns would appear to be part of the global economy. During a slowdown, it is even more important for companies to continue innovating in their respective markets, and developing new products based on new technologies and new benefits to the end user. We did that with our ATI Radeon HD 4000 series, completely redefining the performance per dollar equation for graphics cards, and it has paid off in increased sales and market share gains.

X-bit labs: Do you think that because end-users reduce their spending, companies like ATI or Nvidia will concentrate on development of entry-level or mainstream graphics processing units and not high-end GPUs?

David Cummings: We have our most compelling, complete graphics product stack in the company’s history. Our ATI Radeon HD 4000 series is bullet proof in that we have something for everyone, from our value priced ATI Radeon HD 4350 through to the ATI Radeon HD 4870 X2, a card that continues to be the fastest single graphics card on the market today. If we find sales are slowing down in a given price band and picking up in another, we are ready.

In terms of determining future products, the engineering efficiency approach we adopted with the ATI Radeon HD 3000 series and perfected with the ATI Radeon HD 4000 series (also referred to as our “sweet spot strategy”) gives us a great deal of flexibility in building that one graphics chip that can then serve as the building block for our entire product stack. This approach gives us tremendous latitude in building the right products for the right market segments.

X-bit labs: Will ATI/AMD reduce research and development (R&D) spending because of the economic crisis?

David Cummings: As mentioned earlier, innovation is even more critical during times of economic turmoil. We intend to maintain the pace of research and innovation that has enabled us to maintain our technology leadership in the graphics market.

X-bit labs: Quite a lot has happened in the industry in the recent years, do you feel the changes in terms of demand on the market of graphics cards in general as well as requirements of end-users?

David Cummings: We definitely see the changes and in fact those changes were a big part of ATI and AMD coming together. First, we wanted compelling platform (CPU, GPU, chipset) solutions to offer our OEM and channel partners. Second, we wanted strong integrated graphics products. And third, we wanted to continue delivering exceptional discrete graphics products. We have succeeded in all three areas.

X-bit labs: What are the primary goals that you think AMD’s graphics products group have to achieve in the short term?

David Cummings: We must continue to offer compelling graphics products that deliver on our promise of the ultimate visual experience. That means an immersive game experience as well as a great multimedia experience.

X-bit labs: The market of discrete desktop graphics cards has been very stable in the recent years and with several exceptions TAM (total available market) was in the range of 20 – 22 million units per quarter (according to Jon Peddie Research). Do you think it will stay on than level, or will increase or decrease?

David Cummings: There continues to be a huge opportunity for discrete graphics. First, it is a common misconception that PC gaming is on the decline. Recent data that includes digital downloads and online gaming indicates that the PC remains an important gaming platform. At the same time, the trend toward more realism in games continues and each incremental improvement in game realism demands more graphics horsepower. Second, the price of big screen monitors and televisions continues to drop, so more people than ever before are buying large format screens for gaming, watching multimedia content, and working.  Bigger screens tend to draw attention to limitations of lower end graphics so more and more people are paying attention to graphics.

According to Jon Peddie Research, the demand towards performance-mainstream and enthusiast-class graphics cards will be increasing, whereas basic graphics boards are losing popularity because of higher-performance IGPs and growing demands among end-users.

X-bit labs: Unlike the TAM, average selling price (ASP) of a graphics card has been fluctuating dramatically in the recent years, which probably affected both ATI and Nvidia materially. Do you think that ASPs will continue to rise and fall or will stabilize at a certain level at some point in future?

David Cummings: ASPs are very much a function of supply and demand so it is tough to answer that question with any degree of accuracy. I know that performance per dollar will continue to go up and that will ultimately be good for the end-user as they get more graphics performance for their money with each new generation of graphics products.

X-bit labs: What are the markets that ATI would target on the first place in terms of revenue increase: discrete desktop, discrete mobile, professional cards?

David Cummings: We arguably have the best products in all three areas, however in terms of untapped market share, our biggest opportunity is in professional graphics. Current market share numbers do not at all reflect the competitiveness of our professional graphics product stack. We intend to change that.

X-bit labs: Can you talk about perception of standalone graphics cards in different regions around the globe? Which countries consume more high-end graphics cards and which are all about entry-level products?

David Cummings: There are definitely regional differences. As an example, the Japanese market tends to prefer console gaming over PC gaming so our sales mix is very different there when compared to a country where PC gaming is more prevalent, like South Korea.

X-bit labs: Do you think that there is a market for discrete graphics cards in developing markets, such as Africa or India?

David Cummings: Absolutely, there is a market for discrete graphics wherever personal computers are sold. Discrete graphics adds to the overall experience and in many cases unleashes aspects of the computer that cannot be fully experienced even with today’s more robust integrated graphics products. While a better video game experience is probably the most obvious benefit, the entire user experience can be improved, from an improved user interface through to photo editing and viewing multimedia content.

X-bit labs: ATI got number of new add-in-board (AIB) partners this year – Gainward, Force 3D, XFX just to name a few. Was it a result of very competitive ATI Radeon HD 4000-series GPUs, or is it because ATI/AMD changed its way of working with AIB companies?

David Cummings: We remain committed to working with a small group of AIB partners as that lends itself to deeper engagement with each partner. That being said, the tremendous success of the ATI Radeon HD 4000 series made it necessary to add more partners to meet demand. We chose those partners carefully.

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