3dfx pulls plug on graphics card production

For whom the bell tolls...

3dfx is bailing out of the 3D graphics card market, just two years after spending millions to buy STB Systems to bring board production in house.

If that's not a sign of 3dfx's desperation, nothing is. The company itself puts it: "We're trying to be more fiscally responsible. Basically, we're reinventing ourselves." Brave words, but it's hard not to see them a spin for 'we're up the spout if we don't do something drastic'.

3dfx's motivation is its plummeting revenues, which it blames on the production problems getting its Voodoo 5 family of boards to market. It says a lot, though, that the company doesn't believe it can solve those problems by any other means than ending production.

That means the company must now seek out third-party vendors like Creative, Elsa and Gulliemot and persuade them to buy its VSA-100 chips, just as they used to buy its Voodoo and Voodoo 2 graphics processors.

The snag is that they may be unwilling to do so. 3dfx really didn't make any friends when it bought STB, and effectively told its partners to push off. They're unlikely to be willing to cut it much slack now it's so desperately hoist on its own petard.

That said, Voodoo remains a powerful brand in the retail market, and that may yet persuade card vendors to sign up. Indeed, 3dfx has had much success in the retail arena partly thanks to the strength of its brand, though mainly by massively discounting board prices.

As one competitor told us a little while back: "It's going to be hard to beat 3dfx's market share, while they're giving away cards."

The sorry part is that it's all 3dfx's fault. The discounting was done to maintain Voodoo 3 sales through the interminable delays the company had developing and then producing the VSA-100 chip, sold on Voodoo 4 (single-chip implementation) and Voodoo 5 (multi-chip versions) boards.

The company also wanted to demonstrate it could still dominate the sales charts without board manufacture partners. But by taking the approach it did, 3dfx ensured it wouldn't make as much money out of card sales, thus putting in jeopardy the very strategy it was trying to justify. It also contributed to the price war that's nuked margins in the graphics card market, and hurt not only 3dfx but ATI

To win back the partners it once pissed off, 3dfx has to come up with something very special. The arrival of the successor to the VSA-100, codenamed Mosaic, will mark the end of 3dfx's own board production, which will churn out existing Voodoo 4 and 5 products until that time.

Mosaic will incorporate technology 3dfx acquired when it bought Gigapixel earlier this year. Gigapixel's tile-based rendering scheme limits the amount of data that CPU, graphics co-processor and system bus need handle at any given time, massively speeding up the rendering process. But Mosaic will have to be damn impressive to persuade card vendors to shift from Nvidia.

With Nvidia now dominating the desktop PC graphics chip market and with its sights firmly set on beating market leader ATI in the notebook space, too, 3dfx is in for a very tough ride, and the company knows it: "It's going to take time," Nayan Patel, divisional marketing manager of desktop graphics, told CNN. "It's not going to be a quick fix."

And, we suspect, not quick enough to prevent 3dfx being bought up. With its share price at a low hovering around the $4 mark, it's technology and brandname makes it a tempting purchase, particularly once it's shot of all its board factories.

Indeed, when a company gets this desperate, reaches such a low ebb, not many observers will even be willing to bet on it still being around in three years' time. Expect ATI, Nvidia or a Via-style Taiwanese semiconductor conglomerate to whip out its chequebook real soon. ®

Related Stories

Nvidia to buy 3dfx?
3dfx on course to win Nvidia patent clash
Blame Europe: now it's 3dfx's turn
3dfx 'disappointed' by Q2 revenue fall