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Advanced Micro Devices is not the only large Intel competitor to rail against Intel's alleged strong-arm tactics.

Nvidia has also complained loudly for years about Intel business practices in the graphics chip market, where Intel commands about 50 percent of the market.

Nvidia is the world's leading supplier of "discrete," or standalone, graphics chips but takes a distant second place in overall market share to Intel, which supplies "integrated" graphics built into the chipsets that accompany all of its processors. Mercury Research estimates the total market for graphics chips, including integrated graphics, at almost $10 billion in 2009.

In the third quarter, Intel had 53 percent of the graphics chip market, up from the 49 percent share in the same period last year, according to Jon Peddie Research, which tracks the graphics chip market. Nvidia took about 24 percent, down from the 28 percent in the third quarter of last year.

These figures get even more lopsided for Intel when the market is segmented into integrated graphics only. "Put your seatbelt on. They've got 80 percent of the notebook integrated market," said Jon Peddie, president of Jon Peddie Research. Though this is a much smaller and more segmented market than overall PC processor market, which was at the center of last week's $1.25 billion settlement between Intel and AMD, it still shows the level of Intel's dominance, according to Peddie.

Nvidia has taken to lampooning Intel. Here, CEO Paul Otellini is the object of satire on Nvidia's 'Intel's Insides' Web site.

(Credit: Nvidia)

Nvidia claims these latter market share figures reflect Intel's "bundling" tactics--the same carrot-and-stick tactics that AMD has cited for years and that were spelled out in a complaint filed by New York's attorney general earlier this month.

Intel is trying to impede competition on two chipset fronts, according to Nvidia. One front is the burgeoning market for chipsets in Netbooks--tiny, inexpensive laptops that are typically priced around $350. In this market, Nvidia sells its Ion chipset, which competes with Intel's integrated graphics product.

"Intel's tactics with Ion have been the most aggressive we've seen from a competitor. They have offered the Atom [a total of three chips] for $25, but when the one-chip Atom is used with Ion, it sells for $45," Nvidia CEO Jen Hsun Huang said in a statement provided to CNET. "A customer can't even choose to resell the chipset and use Ion instead. What's the point of Nvidia getting an Intel bus license if it's impossible to overcome Intel's pricing bundles?" he asked, referring the licensing fee that Nvidia pays Intel.

"We'll keep growing as a company, but further action needs to be taken to protect consumers," Huang said.

Intel disputes this. "He's playing a trick of numbers, said Intel spokesman Chuck Mulloy. "He's giving you a $45 list price--that nobody pays--for a part and then a negotiated price (which is more realistic). He's mixing apples and oranges. We have scrubbed and continue to scrub our pricing practices as it relates to chipsets and processors. It's all above cost. And that meets the legal standard worldwide."

In Netbooks, Nvidia has made some headway this year; its Ion chipset has been used in Netbooks from Hewlett-Packard and Lenovo, among others--and Huang concedes this. But Peddie said Nvidia still faces a formidable challenge. "They're nibbling away it at. But it's a pretty big hill to climb," Peddie said.

In the second front of Nvidia's most hotly-contested feuds with Intel, the former has halted development of chipsets for Intel's new "Nehalem" processor technology (marketed as the Core i series of chips), following a complaint filed by Intel in February--which Nvidia then countered in March. Intel alleged in its motion for a declaratory judgment that the 4-year-old chipset license agreement with Nvidia does not extend to Intel's future-generation processors with "integrated memory controllers," which includes Intel's newest Nehalem Core i processors.

"It's meant to get Nvidia to cease and desist from citing that they have a license," Peddie said. "That's an interesting tactic because if the court rules in favor of keeping Nvidia from saying they have a license, it also creates the burden on the OEMs [PC makers] of not wanting to get in a crossfire between Nvidia and Intel," he said.

Intel again disputes this. "It's not seeking to prevent them from doing anything. For well over a year and including mediation, we argued with Nvidia about their rights under that agreement. And we tried multiple times to reach an agreement. And we could not," Mulloy said. "We asked the court to tell the parties what the agreement means. At the end of that process, we'll work with them and try to figure out what to do next."

Note: Mercury Research numbers were provided by Nvidia.

Despite persistent rumors, Nvidia's chief executive says the graphics chip supplier is not working on an Intel-compatible chip.

Nvidia CEO Jen-Hsun Huang

(Credit: Nvidia)

In an exclusive interview with CNET Thursday, I asked CEO Jen-Hsun Huang about the possibility of Nvidia coming up with its own x86 (Intel-compatible) chip technology, after the company reported strong third-quarter earnings. A recurring rumor has it that Nvidia is developing a chip that would be able to run the same software that runs on all Intel- and AMD-based PCs worldwide.

"No," he said when asked if there was any truth to the rumor. "Nvidia's strategy is very, very clear. I'm very straightforward about it. Right now, more than ever, we have to focus on visual and parallel computing."

Huang went on to describe where the chip supplier sees its best opportunities for growth. "Our strategy is to proliferate the GPU (graphics processing unit) into all kinds of platforms for growth," he said. "GPUs in servers for parallel computing, for supercomputing--and cloud computing with our GPU is a fabulous growth opportunity--and streaming video."

"And also getting our GPUs into the lowest power platforms we can imagine and driving mobile computing with it," Huang added, referring to its Tegra chip, which, for example, powers Microsoft's Zune HD media player.

Despite Huang's denials, Doug Freedman of Broadpoint AmTech is the latest to postulate that Nvidia will enter the x86 central processing unit market. "We feel Nvidia could become a supplier of x86 CPUs by necessity, perhaps in the next 12 months (if not sooner) to preserve both GPU and chipset revenue," Freedman said in a note recently.

"We believe the company has hired former Transmeta staff extensively," Freedman said. Transmeta was at one time a low-power x86-compatible chip supplier. Earlier this year, Intellectual Ventures acquired the patent portfolio of Transmeta.

Huang also dismissed the the possibility of Nvidia using Globalfoundries as a manufacturing partner--typically referred to as a "foundry" or a "fab"--for its chips, after saying in the earnings conference call that Nvidia's longstanding foundry partner--Taiwan Semiconductor Manufacturing Company (TSMC)--was not allocating it enough capacity.

"Globalfoundries is an AMD fab, right?" he said. "Globalfoundries is AMD's fab. Our strategy is TSMC."

Nvidia CEO Jen-Hsun Huang seemed unsurprised by allegations made Wednesday by New York's attorney general that Intel has illegally tried to maintain its monopoly.

Nvidia CEO Jen-Hsun Huang.

(Credit: Nvidia)

"Where there's smoke there's probably fire. It blows my mind that's it's taken this long," Huang said in an interview Thursday, just after the graphics chipmaker posted solid fourth-quarter earnings. Nvidia competes with Intel in the PC graphics chip market.

"Even bribes and kickbacks can't stop somebody from buying our graphics processors," he said, referring to the allegations made in the lawsuit.

When contacted, Intel had no comment.

"Tactics good for AMD are tactics good for Nvidia," he added. "We have far superior products to Intel, that's how we survive by innovating far ahead of (Intel)."

Nvidia is locked in a legal battle with Intel, preventing Nvidia from making chipsets for Intel's "Nehalem" Core i series of chips--the lastest and greatest line of processors from Intel. Nvidia's Ion chipset--used in Apple MacBooks and Hewlett-Packard Netbooks, for example--has been very successful.

Huang also commented on the wave of next-generation tablets and media pads expected to hit the market next year, such as the rumored Apple tablet. Nvidia is already working with device makers who will use its Tegra chip in these designs next year.

"I think that's going to be the next big form factor," he said. "More and more people that use the iPhone would like to have a bigger iPhone. And the fact that 4g is coming--20 megabits per second. What can't you do. I think this (market) space is about to go nuts," he said.

"I really think we're on the cusp of our second personal computer revolution," he said.

The chip recovery is under way, with quarterly sales forecast to increase year-over-year for the first time in 2009, according to a report from market researcher iSuppli on Tuesday.

Revenue from chip sales is expected to rise by 10.6 percent in the fourth quarter compared to the same period in 2008. This would mark the first time this year that revenue has risen compared to the same period a year earlier, according to Dale Ford, senior vice president, market intelligence, for iSuppli.

"The seeds of the current recovery were sown in the second quarter," said Ford. At that time, manufacturers began to report positive book-to-bill ratios, indicating future revenue growth. This was followed by more sequential revenue growth in the third quarter, according to Ford.

Semiconductor inventories returned to more normal levels in the third quarter after chip suppliers shed stockpiles, he added.

Earlier this month, chip giant Intel said third-quarter revenue was down only 8 percent year-over-year, an improvement over the 15 percent and 26 percent year over year declines in the second and first quarters respectively. Intel also indicated that it expects future growth. "We're finished with the cutting phase of our efficiency effort and now in the growth phase of that efficiency effort," said Intel's chief financial officer Stacy Smith at that time.

Overall, it's been a tough year, however. Global semiconductor revenue is set to contract by 16.5 percent in 2009, following a 5.4 percent decrease in 2008.

And iSuppli has added a good dose of caution to its report. Though sequential quarterly increases in revenue will continue into 2010, sales growth will not be sufficient to lift semiconductor revenue back to pre-recessionary levels until the 2011-2012 time frame, according to Ford.

And there are troubling indicators such as the climbing U.S. unemployment rate, which reached 9.7 percent in August and is projected to exceed 10 percent at its peak, which will continue to constrain consumer spending, Ford said.

Buoyed by Netbook sales, shipments of Intel graphics chips surged and Advanced Micro Devices gained on Nvidia in the third quarter.

Third-quarter shipments of graphics processors jumped 21.2 percent over the second quarter, according to market researcher Jon Peddie Research. Graphics chips drive the images produced on PC users' screens.

A total of 119.45 million units were shipped in the third quarter, exceeding the record 111 million units that shipped in the third quarter of 2008, according to Jon Peddie, president of Jon Peddie Research. "So the market has caught up with, and exceeded, last year's highs. The crash of fall 2008 is now behind us," he said in a statement.

The third quarter exceeded a robust second quarter. "Q2 was already a great quarter clearly signaling the holidays will be robust for PCs and the industry in general," Peddie said.

AMD gained on discrete graphics chip leader Nvidia in quarter-to-quarter growth.

(Credit: Jon Peddie Research)

AMD showed the biggest jump in quarter-to-quarter growth at 30 percent, followed by Intel at 21 percent. But Intel dominates raw shipments. "Intel shipped the most parts at 63 million, over twice as many as its nearest competitor Nvidia," according to Peddie, who said Intel had a 53 percent share of the market in the third quarter. Nvidia was second with 24.9 percent, followed by AMD with 19.8 percent.

Surging Netbook shipments are behind the big Intel numbers. Integrated graphics in notebooks, which includes Netbooks, increased 27 percent over the second quarter. Integrated graphics are built into supporting Intel silicon called chipsets.

"Netbooks will remain popular but they will not have the high market share they had during the recession when they were just introduced. Rather, consumers are expected to 'buy up' in the next quarter," according to Peddie.

Fourth-quarter shipments may not be as strong as the third quarter, however. "The channel is full...That suggests that while Q4 is typically a good quarter for PCs, the quarter-to-quarter growth in Q4 may not be as robust as Q3. Graphics are a great leading indicator. The graphics go in before the PC is built or shipped," Peddie said.

Updated at 4:40 p.m. PDT: adding to discussion of next-generation Nvidia Ion chip.

As graphics kingpin Nvidia tries to reshape itself into a broad-based computing company, it is taking big gambles with potentially big payoffs, while it fends off challenges from rivals Intel and Advanced Micro Devices.

The world's largest supplier of standalone graphics chips for PCs needs to grow. Established markets have matured and Nvidia must seek out other ways to make money.

Nvidia's Fermi-based GF100 graphics processor.

"In almost every market they have entered they have become dominant," said Jon Peddie, president of Jon Peddie Research, which tracks the graphics chip market. "Almost 90 percent market share in the workstation business and 55 to 65 percent in the graphics business. But if you're that successful you can't really grow the market anymore, and if you want to keep growing your company, then you have to get into new markets."

Enter supercomputing and Nvidia's brand-new Fermi architecture. "That's a huge market and big margins," said Peddie. Fermi was announced last week at an Nvidia conference to great fanfare when prestigious Oak Ridge National Laboratory said it plans to use Fermi in a future supercomputer.

It would be an understatement to say that the Fermi chip potentially packs a computing wallop. The chip integrates an astounding 3 billion transistors, about three times the number of transistors in Nvidia's most powerful graphics chip now on the market, and it has been designed with features that make it more suitable for high-performance computers, the first time that Nvidia has architected a chip this way.

Fermi GPUs, each containing 512 processing cores, would enable "substantial scientific breakthroughs" that would be impossible without the new technology, Jeff Nichols, Oak Ridge's associate lab director for computing and computational sciences, said last week.

Nvidia hopes to parlay this computing power into the mainstream. (For a comparison of Fermi with AMD's newest graphics chip see: ATI and Nvidia face off--obliquely.)

"Fermi will offer Nvidia the opportunity to grow our consumer business by having the fastest raw graphics power," said Drew Henry, general manager of Nvidia's bread-and-butter GeForce graphics business. "But it's also going to expand our business by allowing people to process better video and photo applications and to use the GPU for many, many more mainstream applications." (GPU stands for graphics processing unit.)

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Nvidia's new Fermi chip is being billed as a supercomputing chip but Nvidia doesn't want you to forget that it is also aimed at Apple's Snow Leopard and Windows 7.

The Fermi chip was announced with much fanfare on Wednesday as key silicon in a future supercomputer from Oak Ridge National Laboratory. But, wait, Fermi is also going to be great at accelerating stuff in Snow Leopard and Windows 7--not to mention a great gaming chip, according to Bill Dally, chief scientist at Nvidia who spoke during a conference call with analysts on Thursday.

The Fermi graphics processing unit (GPU)--which packs 512 processing cores--will support DirectX-11, a technology for speeding certain multimedia software in Windows 7, and also support an analogous technology in Snow Leopard, OpenCL.

"A lot of (the chip's new) features accelerate key consumer applications. Both Snow Leopard and Windows 7 enable the GPU to be used as a co-processor to accelerate third-party applications," Dally said. With a "discrete (standalone) GPU they can get very good performance on these applications," he said.

Applications that Nvidia says will be accelerated by the Fermi chip

(Credit: Nvidia)

Dally gave examples (see graphic) of consumer titles such as Adobe's Creative Suite, Motion DSP's vReveal (for fixing photographs), and Badaboom (for creating iPod video).

He offered a qualifier, however. "We are paying a bit of a compute tax in that we launched a part where a lot of the consumer compute applications haven't really taken hold yet. But over time as more consumer computer applications are developed that take advantage of our compute (consumer) features...I think it's going to give us a big leg up," he said.

And being an Nvidia chip, games are a big target market. "Fermi adds value to games by doing exactly the same kind of scientific simulations that we use to predict climate and to understand the genome and other things," according to Dally. "A great example of that is our PhysX package that basically does physical simulations to make games appear more real."

He also explained why the chip was billed as a supercomputer chip initially and not a gaming chip. "It's a zero-sum game. You have a certain amount of die (chip) area, a certain power budget. It is the case that we put a bunch of die area into double-precision floating point, a bunch of die area into ECC. And for gaming graphics applications, those give less returns than they do for the scientific applications," he said. Double-precision floating point operations are used heavily in scientific computing. ECC, or error correcting code, is a technology that can correct data errors on the fly.

And Dally explained how Fermi can be scaled down to lower-end chips used in the gaming and consumer segments. "We're not talking about other (chips) at this point in time but you can imagine that we can scale this part by having fewer than the 512 cores and by having these cores have fewer of the features, for example less double-precision," he said.

All the Fermi products, including gaming and professional workstation chips, will be announced "pretty close together." Chips are expected sometime in the coming few months.

And how does Fermi stack up against current public information about Intel's future "Larrabee" graphics chip? "We can't compare anything to Larrabee until it shows up and can actually be measured," said Jon Peddie, president of Jon Peddie Research, which tracks the graphics chip market. "But remember, Larrabee was started over two years ago and both ATI and Nvidia have had two new designs out since then," he said. "So the pressure will be on Intel to chase fast-moving ATI and Nvidia," Peddie said. ATI, which is Advanced Micro Devices' graphics chip unit, already has a chip in stores--the Radeon HD 5800-- that supports Windows DirectX-11.

Updated at 6:40 p.m. PDT: adding additional information about Fermi chip .

Oak Ridge National Laboratory announced plans today for a new supercomputer that will use Nvidia's next-generation GPU architecture, codenamed "Fermi."

The Oak Ridge and Fermi announcements were made at Nvidia's GPU Technology developer's conference, which kicked off Wednesday in San Jose, Calif. The Fermi chip integrates three billion transistors, about three times the number of transistors in Nvidia's most powerful graphics chip now on the market. In the future, the chip will also find its way into Nvidia's GeForce product line for PCs.

Oak Ridge's supercomputer will be used for research in energy and climate change and is expected to be 10 times more powerful than today's fastest supercomputer, according to a joint statement from Oak Ridge and Nvidia. The architecture would use both graphics processing units (GPUs) from Nvida and central processing units (CPUs), according to Nvidia. Intel and Advanced Micro Devices, among others, make the CPUs.

High-end GPUs today typically contain hundreds of processing cores, allowing them to accelerate certain types of computational tasks much more efficiently, and thereby much faster, than CPUs. The new Fermi chip will have a little more than twice as many cores as current high-end Nvidia GPUs, according to Nvidia CEO Jen-Hsun Huang, jumping from 240 cores to 512 in Fermi.

Nvidia CEO Jen-Hsun Huang shows graphics card with new Fermi chip Wednesday

(Credit: Nvidia)

Fermi GPUs would enable "substantial scientific breakthroughs" that would be impossible without the new technology, said Jeff Nichols, Oak Ridge's associate lab director for Computing and Computational Sciences, in a statement.

"With the help of Nvidia technology, Oak Ridge proposes to create a computing platform that will deliver exascale computing within ten years," Nichols said. Exascale computing proposes to go beyond petaflop performance (a thousand trillion) to one million trillion operations per second.

Oak Ridge also announced it will be creating the Hybrid Multicore Consortium focused on computing with different types of processor architectures. The goals of this consortium are to work with the developers to run applications on the next generation of supercomputers built with CPUs and GPUs.

Nvidia's rival AMD recently announced one of its fastest graphics chips yet that packs 2.15 billion transistors and supports Microsoft's upcoming DirectX 11 programming interface for accelerating graphics and general-purpose computing in Windows 7. The ATI Radeon HD 5870 has received consistently positive reviews, beating comparable Nvidia chips and, most importantly, it is available now.

SAN FRANCISCO--Heads up, Nvidia. Intel demonstrated its Larrabee graphics chip for the first time Tuesday at the Intel Developer Forum.

Larrabee will be Intel's first discrete, or standalone, graphics processor in about 10 years and is expected to compete with graphics chips from Nvidia and AMD's ATI unit. The demo used an early "stepping," or version, of Larrabee, which is expected to come out commercially sometime next year.

Larrabee will be targeted initially at the gaming market. The demonstration was based on the game Enemy Territory: Quake Wars from Splash Damage (See video.)

"This is a ray tracing demo," said Intel senior research scientist Bill Mark during the demonstration. "We took the content, the textures, and geometry, pulled it out of that game and put it into our ray tracing engine."

Mark described ray tracing technology as allowing "you to simulate the interaction of light with matter in a way that's accurate and makes it really easy to get effects like light and shadows."

"If you look at the water. That's done with only 10 lines of...code," he said. The demo was written in C++.

Mark said the same thing can be done on a standard multicore Intel processor but with Larrabee there is more parallelism--or the ability to do more things at the same time.