Microsoft, ATI sign graphics deal for future XBoxes

ATI Technologies Inc. has secured a "future technology agreement" for upcoming versions of Microsoft Corp.'s XBox, taking over the business formerly held by rival graphics vendor Nvidia Corp., ATI announced Thursday.

ATI will license graphics technology to Microsoft for the next version of the XBox, said Chris Evenden, an ATI spokesman. Microsoft will attempt to surpass gaming console leader Sony Computer Entertainment Inc.'s Playstation 2 with the next generation of the XBox. The XBox has overtaken longtime gaming company Nintendo Co. Ltd.'s GameCube, but trails Sony among console gamers.

Financial terms of the deal were not disclosed, Evenden said.

Nvidia had recently signaled that it wouldn't be interested in pursuing the next-generation XBox business, said Jon Peddie, principal analyst for Jon Peddie Research in Tiburon, California. The company recently said it was looking to cut costs, and a number of industry observers have indicated that Microsoft was looking for another partner, Peddie said.

Microsoft and Nvidia have sparred over pricing issues since their initial agreement was signed in 2000. The companies brought in an arbitrator in 2002 to hear a dispute over the price Microsoft pays for Nvidia's chips. But they agreed to settle their differences in February, and talked of a future partnership to reduce XBox costs.

At one point in 2002, Nvidia was also left with a sizable amount of unusable inventory after Microsoft changed the security settings for the XBox, forcing Nvidia to absorb that cost. ATI will not carry inventory for Microsoft, Evenden said.

Sony and Nintendo have both designed their own graphics controllers for their consoles using intellectual property from other companies, Peddie said. In fact, Nintendo uses ATI's technology in the GameCube, an arrangement Microsoft was aware of as it evaluated ATI's technology, Evenden said.

Those companies have greatly lowered the cost of their graphics engine with the strategy, but the approach can be tricky, Peddie said.

"By going for an intellectual property deal, Microsoft now has to get involved with the fabs and integrated circuit design. Although the company has had experience doing things like that with its WebTV box and its set-top box, they may or may not have a team in place ready to go quickly. Building and testing high-performance integrated circuits at 0.13-microns or better is really tricky stuff," he said.

Microsoft would cut their overall costs, but would "take on quite a burden of technology management," Peddie said.

Nvidia will continue to supply XBox graphics chips for the current generation of the console, the Microsoft spokeswoman said. An Nvidia spokesman did not immediately return calls seeking comment.

Join the newsletter!


Sign up to gain exclusive access to email subscriptions, event invitations, competitions, giveaways, and much more.

Membership is free, and your security and privacy remain protected. View our privacy policy before signing up.

Error: Please check your email address.
Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.

Tom Krazit

IDG News Service
Show Comments

Brand Post

Most Popular Reviews

Latest Articles


PCW Evaluation Team

Andrew Teoh

Brother MFC-L9570CDW Multifunction Printer

Touch screen visibility and operation was great and easy to navigate. Each menu and sub-menu was in an understandable order and category

Louise Coady

Brother MFC-L9570CDW Multifunction Printer

The printer was convenient, produced clear and vibrant images and was very easy to use

Edwina Hargreaves

WD My Cloud Home

I would recommend this device for families and small businesses who want one safe place to store all their important digital content and a way to easily share it with friends, family, business partners, or customers.

Walid Mikhael

Brother QL-820NWB Professional Label Printer

It’s easy to set up, it’s compact and quiet when printing and to top if off, the print quality is excellent. This is hands down the best printer I’ve used for printing labels.

Ben Ramsden

Sharp PN-40TC1 Huddle Board

Brainstorming, innovation, problem solving, and negotiation have all become much more productive and valuable if people can easily collaborate in real time with minimal friction.

Sarah Ieroianni

Brother QL-820NWB Professional Label Printer

The print quality also does not disappoint, it’s clear, bold, doesn’t smudge and the text is perfectly sized.

Featured Content

Product Launch Showcase

Latest Jobs

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?