***3D Christmas 96
By John Latta
Expectations hang on 1996 being a great 3D Christmas. 4th Wave's
estimate is that 5 million 3D chips will be sold in 1996 and by every
indication a vast majority of these will be sold in Q4. 1995 saw only
about 140,000 units. Yet, at E3 there was considerable anticipation
and some anxiety about Christmas 1996. Both S3 and ATI are
pushing to be #1 and #2 in units shipped and our estimates are that
they are planning on 9m and 5m respectively. S3 has a simple
strategy: System OEMs will have no financial issues if they decide
to use 3D. The reason is simple - price the chips at the same level as
their high end 2D products and make the chip plug compatible with
existing designs. The OEM's can then add 3D to the product line at
virtually no additional cost. Companies such as Rendition, 3D fx,
and 3D Labs are at a distinct disadvantage because adopting their
chips means a new design. Yet, many in the industry scoff at the
thought that the S3 and ATI chips, as Jon Peddie calls them "Free-
D," are serious 3D solutions. Yet, both S3 and ATI must attack the
increasing penetration of 3D which can overtake their existing
markets in 2D acceleration. If there is cannibalism you better be the
cannibal of your own markets.
The quality leader today is 3D fx and they were very effective in
showing the impact of their design on the show floor. At their trailer
across from E3 one could pick up a list of companies showing titles
using the chip. We asked both S3 and ATI for such a list and they
seem surprised at the request. There is an important take away from
this - quality reigns both with users and game companies. Ross
Smith of 3D fx describes the emergence of a class of users - the
"Pixel Fill Junkies." We see Christmas 1996 as a important battle
ground.
Fab orders for chips need to be placed by mid-July for quantities to
be ready for sales in November and December. The actions taken in
the next few weeks will determine how many chips will be on hand.
Right now this is a gamble.
The cloud over 3D is the lack of compelling content. Given the late
shipment of Direct3D, we picked up that from 50 - 100 titles could
be shipped by Christmas at E3, and it is likely that the number of
high quality titles will be significantly less than this. If game titles
drive the market one of the few ways the market will get driven is
bundling. In 1995 this was not effective in stimulating mass unit
volumes. We believe that the critical market dynamic will be quality
in both the 3D images and quality of play. There is a lure to low cost
3D but even in 1996 consumers will be critical buyers and we remain
convinced that the unit volumes and impact of 3D will be less than
many expect. We still feel that the sell through will be in the 5 - 7
million unit range. A good 3D Christmas but not a great one.
Wave Issue 9601 6/23/96 Article 8-01