3Dlabs--Creative's launch pad into mobile space?

Wholly-owned subsidiary of Creative confirms handset makers in Asia are evaluating its mobile processor, but won't say if Creative is one of them.
Written by Eileen Yu, Senior Contributing Editor
SINGAPORE--A wholly-owned subsidiary of Creative Technology has confirmed that some handset manufacturers in the region are evaluating its new mobile processor, but stopped short of saying whether Creative is one of them.
"We have not announced any Creative music players containing a 3Dlabs processor, nor have we announced our product roadmap for our Zen family of players."
-- Phil O'Shaughnessy
Creative Labs

Acquired by Creative in May 2002, US-based 3Dlabs had announced in February 2006 plans to move away from its former 3D graphics business and refocus on the portable handheld device market. The company formally launched its first mobile processor DMS-02 in November last year, marking 3Dlabs' entry into the handheld media space.

In an e-mail interview with ZDNet Asia, Tim Lewis, director of sales and marketing at 3Dlabs, confirmed it is currently "working with a number of [handset] manufacturers" in Asia which are evaluating the DMS-02 chip "for future product introductions". Due to non-disclosure agreements, Lewis said he was unable to provide details on un-announced products.

He noted that 3Dlabs anticipates the first product announcements to be in the portable media player (PMP), personal navigation device (PND) and video surveillance market segments.

The fabless semiconductor company is touting the DMS-02 as a key component in next-generation navigation and location-aware mobile devices, capable of supporting high-quality video, 2D/3D graphics and audio, including HD720p H.264 video playback.

Lewis said: "We expect to build initial momentum with manufacturers toward the higher end of the PMP/PND and connected appliance markets."

Asked if Creative's close ties with 3Dlabs could mean the introduction of a new mobile device from Creative, Lewis said: "We obviously have a good relationship with Creative, but we treat them as we would any other customer and have to win their business.

"And, like any other customer, we will not pre-announce or speculate on future announcements," he added.

Singapore-based Creative also remained mum on the issue. When contacted, Phil O'Shaughnessy, senior director of corporate communications at Creative Labs, would only say: "We have not announced any Creative music players containing a 3Dlabs processor, nor have we announced our product roadmap for our Zen family of players."

Lewis, however, did say that 3Dlabs is looking to spin off from Creative and become a separate entity in order to "realize its full potential as a fabless semiconductor company".

Flint Pulskamp, program manager for wireless semiconductors at research house IDC, noted that he has yet to see any announcements of 3Dlabs design wins with the major mobile phone OEMs (original equipment manufacturers).

Pulskamp also noted that this market is "becoming increasingly difficult for a small pure-play multimedia coprocessor player to penetrate since platform solutions are so compelling". Coprocessors are components deployed to supplement the functions of the CPU, or the primary processor.

Gaining traction in the mobile phone space will be difficult, Pulskamp said in an e-mail interview.

"Many multimedia coprocessor vendors target not only mobile phones but other consumer electronics segments such as PMPs, games devices and other connected products, in order to diversify their industry focus," he added.

Keeping Apple at bay?
While it remains to be seen if 3Dlabs will indeed be a launch pad for Creative to come up with a multimedia handheld product, all eyes are on the Singapore company's next move after its rival Apple launched the iPhone last month.

Analyst reactions on the new Apple mobile device have generally been positive, though one noted that the absence of 3G capabilities could be an issue.

Aloysius Choong, IDC's Asia-Pacific senior market analyst for personal systems research, said: "In our end-user surveys, IDC has found that branding and design have consistently been ranked among the most important factors for Asian consumers. And, Apple has them in spades.

"We do expect the company to perform credibly in Asia-Pacific, but mass market success will depend on numerous other factors, such as actual feature implementation, marketing and operator support," he told ZDNet Asia.

And if the Apple iPhone still lacks support for 3G when it makes its way to this region in 2008, Choong noted that operators will be less inclined to carry and offer the product at a subsidized rate.

Also, he added that by that time, consumers will see 3G as a standard feature in mobile phones and expect to have the capability--even if they do not actually use it.

Meanwhile, Creative reported a net income of US$92.1 million for its second fiscal quarter ended Dec. 31, 2006, which is a significant increase from US$8.2 million during the same quarter in the previous year.

The income spike is largely the result of a lump-sum US$100 million payment from Apple as settlement for a legal dispute over Creative's patent of a user-interface technology found in its Zen music players. Creative had however, attributed some of the income hike to strong sales of its Zen products.

Last month, 3Dlabs announced that DMS-02 handheld devices will be able to run Opera 9 Web browser. Lewis told ZDNet Asia that the company will continue to work with middleware partners that offer solutions to complement its mobile processor.

"Today's PNDs offer more and more media playing capabilities, so the advantages of our flexible architecture become more obvious--be it in audio or HD video playback, or down the line of something like base-band processing of digital broadcast streams," he added.

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