Intel (INTC) is about to hit the market with a new set of graphics chips and they are aimed directly at the hearts of Nvidia (NVDA) and AMD (AMD) which both count of the expensive products for large portions of their sales.
According to The Wall Street Journal, "Intel could gain as much as $4.6 billion in new revenue in 2010 if it matched Nvidia’s and AMD’s market shares in specialized products, known as GPUs or graphics-processing units."
AMD and Nvidia have problems so severe that they may not be able to be solved soon. AMD bought graphics chip maker ATI. The deal has been a bust and AMD is saddled with $5 billion in debt and no operating income. Nvidia missed its last quarter badly and its shares are down over 60% during the last year.
The margins in the chip market are already eroding and a slow global economy could cut into bread-and-butter PC and server sales.
Intel putting its heft against one more segment of the industry is likely to cut even its own margins as price becomes a critical factor in picking up new customers.
Intel can afford the modest margins, at least for a time. Its competition cannot.
Douglas A. McIntyre