A well known server manufacturer TYAN recently said it would not produce any new offerings for the graphics cards market because of unprecedented competition in the market. The company’s claim follows some other makers of graphics cards who recently decided to pull back from the business.

Strategic Plans Modified

TYAN entered the market of graphics cards in mid-2002 after some hesitations. The firm utilized graphics processors from ATI Technologies for its products, but embedded certain additional capabilities on its boards, such as hardware monitoring, bringing exclusive products into the market.

In an attempt to boost its competitiveness TYAN established an R&D center in Taiwan that should develop consumer oriented products like graphics cards, uni-processor mainboards, server barebones as well as some other hardware employing 40 to 50 engineers. That time it was said that expansion in Asia meant the company intended to aim at the market of consumer personal computers, not only server and workstation market.

CoolTechZone web-site reports that TYAN is still excited about uni-processor mainboards, but will no longer produce graphics cards. According to the report, TYAN faced extremely strong competition from other makers of graphics cards, which may either erode totally profits or to lower the gross-margins to very low level.

Smaller Graphics Cards Vendors Leave the Market?

Earlier this year Guillemot Corporation and Terratec elected to progressively withdraw from the graphics card business, which have been producing very weak gross margins, in order to mobilize all of their resources towards the development of markets with strong potential. According to official statements, both companies will concentrate on audio- and multimedia-related offerings.

X-bit labs believes that the trend when minor producers of graphics cards choose to resign from the market will continue. Development, production and engineering costs of modern graphics processors and cards are soaring, which makes graphics cards more expensive to produce. As a result, smaller players focused on strong gross-margins are likely to exit the field with relatively low profits.