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S3 chip team sale: the potential buyers lined up

Step forward Nvidia as the main contender, but there are others...

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While S3 continues to remain tight-lipped as to the identity of the mystery buyer of its 3D graphics chip development operation (ie. that part of the merged S3/Diamond that isn't... er... Diamond), a nice little chain of logic has emerged that leads to a possible buyer. The links were uncovered by Web site Tech Report, and following it through, it makes a lot of sense. Tech Report rules out 3dfx because it's just engaged in the purchase of Gigapixel. To that, we'd add the point that 3dfx is far from wealthy right now, and while it might buy a company to get its technology - hence the Gigapixel deal - it's unlikely to get anything juicy from S3 that it isn't working on already. It might want to by S3 to eliminate it as a competitor, but it's questionable whether it could afford to do so, and such an act would in fact simply strengthen Nvidia's hand. After all, who else are S3's customers going to go to? Not 3dfx, that's for sure. So look to Nvidia, says Tech Report. The case for the prosecution rests on Nvidia's recent technology licensing deal with S3, but mostly on Nvidia's move to sell $400 million worth of stock this week (though, we note, you'd expect a purchase to be funded not by cash but by a stock-swap, especially since S3 would presumably want to buy Nvidia chips for its own boards). Nvidia has also said it's in the market for acquisitions. To Tech Report's argument, we'd add that S3 owns S3TC, the texture compression scheme that's now part of Microsoft's DirectX, and with Nvidia now chums with the Beast of Redmond, thanks to its involvement in the X-Box project, it might well want to strengthen that role by taking charge of S3TC. At the same time, S3's Savage 2000 competes directly with Nvidia's GeForce as a rival 256-bit chip with an integrated transform and lighting engine. Unlike 3dfx, Nvidia would gain by eliminating this competition. Nvidia is certainly the most likely candidate, but there are others that shouldn't yet be ruled out. First, ATI has been very acquisitive over the last 18 months, and as S3's erstwhile arch-rival would be very highly motivated to buy it up. After all, it was S3's cock-up of its product line a couple of years back that allowed ATI to rise to prominence in the OEM market and become the biggest 3D graphics company. ATI is sitting on plenty of money, and could easily afford whatever S3 is asking for its chip division. Again, acquiring S3 would also neatly eliminate ATI's main competitor in the OEM and mobile spaces. We'd also like to chuck Intel into the ring. S3 has had a very strong partnership with Chipzilla for some time now, largely by leveraging its purchase some years back of the patent portfolio left behind when processor developer Exponential shuffled off its mortal coil. Intel wanted access to them, and traded its own 3D graphics patents to S3 in return. 3D graphics is the one area of semiconductor design at which Intel has neither excelled nor built up a solid business. So it might very well like to acquire one in order to relaunch its own 3D operation, built out of the bones of Real3D, in which it once invested and now owns (Real3D shut down last year, and Intel bought up the bits). Finally, as we reported a little while ago, that Via has its eye on S3, and while the rumours suggested it would like to buy the company outright, we suspect what it really wants is the chip business, to help it compete in the integrated chipset business with Intel and Acer Labs. ® Related Stories S3 readies graphics chips hive-off 3dfx to grab Gigapixel for $186m S3 and Nvidia kiss and make up Via to buy S3 outright? Real3D dead - Intel buys bones Link You can read Tech Report's analysis here

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