ATI to license chips to third parties
Follows NVIDIA's lead, but will continue to sell own boards as well
ATI is opening its entire range of graphics chips to third-party add-in card makers, the company has announced. In essence ATI, which has always produced its own boards using its own chip technology, is adopting Nvidia's strategy of selling chips and board reference designs to third-parties. Unlike Nvidia, it will continue to sell boards under its own brand.
Nvidia's strategy works because it allows it to focus on what it knows best - graphics chip design - and it doesn't put it in direct competition with its graphics card partners. To avoid such conflict, ATI's approach is to allow its partners only to target system integrators and reseller channels. The company will continue to push its own boards into the retail arena. It will also sell its boards, along with standalone graphics chips, to large OEMs - Apple, for instance.
Clearly ATI hopes that its partners will be able to bring down the price of Rage and Radeon-based board, thanks to competition among suppliers and much-reduced cost to market considerations - selling to margin-conscious system integrators is easier than selling to consumers in the advertising-driven retail space. If the plan works, it should broaden ATI's presence in the PC market, simply by getting more 'Powered by ATI' (or however the boards end up being stamped) out into the market. And it presumably hopes that when buyers upgrade their graphics, they'll stick with the ATI brand. The upshot, ATI hopes, will be more ATI-based chips out there with the consequent boost to its finances and marketshare.
Success depends on minimising competition between ATI and its third-party board makers. Segmenting the market the way ATI has will help, but what's to stop major OEMs buying the cheapest possible boards from the third-parties and cutting ATI out of the loop? ATI will still make money on the deal, through the chips the board makers will buy, but not as much as it would dealing with the OEM directly. With sufficient numbers of board makers, ATI will make up the loss, and presumably it's confident it can do so.
Either that, or desperate times are resulting in desperate methods. ATI is struggling to return to profitability and to regain its marketshare in the face of Nvidia's considerable success. ATI may feel it has nothing to lose if it has to surrender to others markets it has jealously guarded for its own products for so long.