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ATI Technologies confirmed during the last quarter’s conference call that its forthcoming graphics processor code-named R520 has been delayed, however, reassured investors and analysts that this Fall it would have a lineup of visual processing units produced using 90nm process technology. The news came right after commercial launch of NVIDIA's GeForce 7800 GTX graphics chip, the fastest performing graphics accelerator to date.

ATI R520 Delayed, but “Under Control”

“In the case of the R520 we have seen some delay. Particularly, we need to deal with a new technology at the high-end. It’s a combination of both architectural and [process] technology bring up. We have this well under control now. As Patrick described, we’ve taken a cautious position to not to consider revenues in our Q4 for our 90nm line,” said David Orton, the CEO of ATI.

“We have prepared to bring a full-range of 90nm GPUs to the market this Fall,” Mr. Orton added.

Some sources told X-bit labs that ATI's new visual processing unit is now set to launch in August, 2005. However, none of official representatives so far have confirmed that.

ATI’s Next-Gen Product Required Additional Prototyping

The company also claimed it had to spend some additional funds on prototyping of its 90nm products. Nevertheless, the company said it was satisfied with the 90nm process technology at TSMC.

“The increase [of spending] in the quarter was largely driven by a jump in prototyping costs related to the development of future products on 90nm process technology,” said Patrick Crowley, CFO and Senior Vice President, Finance.

“From a 90nm technology, we are extremely encouraged both with readiness of the technology, the capacity, the yields… And we’ve got very successful experience with the Xbox 360 and a bring up and ramp of its GPU,” ATI’s CEO said.

The information about additional prototyping by ATI indirectly confirmed a news-story published earlier at X-bit labs, according to which the company was working on a re-spin that is aimed to improve yields of the R520 product so that the company could deliver as many next-generation graphics processors as possible. The source told X-bit labs that from functionality standpoint the R520 graphics processing unit was fully functional.

Re-spinning of a chip is a costly process, as every re-spin costs several millions of U.S. dollars. Still, provided that such a re-spin would improves commercial yield by a significant margin, the cost of re-spin will be compensated because of extremely high profit margin on high-end graphics processors.

“We are looking for new technologies to be very strong, leadership, products. By having leadership products you really should be able to get value from there. We’ve learnt though other technologies beyond the GPUs the ramp around 90nm. So, I think the team has experience with the technology… I think we’ll be well under control as we move this Fall with the new GPUs,” said Mr. Orton.

ATI code-named R520 VPU is projected to support Shader Model 3.0 and other innovations, which requires a totally new graphics architecture from ATI. Still, general specifications of ATI’s code-named R520 VPU are unclear at this time.

ATI’s Revenue, Profits Below Expectations

Revenues of ATI Technologies grew $39 million or nearly 8% to $530 million relative to the third quarter of fiscal 2004, which was below to analysts’ estimations. Gross margin percentage was 29.1%. For the third quarter, net loss was $0.4 million ($0.00 per share), as compared with net income of $49 million ($0.19 per share) in the third quarter last year.

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