Games boost chip industry

Amid sluggish sales from PC chip giants, the games business could offer a ray of hope

PC chipmakers are having a hard time of it so far this year, but they could get a boost from an unusual quarter -- the games industry.

Chip companies, particularly Intel, have long put money into developing ever-better multimedia technologies to give consumers and businesses a reason for investing in more powerful CPUs. But the role of games in boosting sales is coming into sharp focus as the PC market struggles through its second disastrous quarter in a row.

Whatever happens to the rest of the economy in Europe and the US, the games market is expected to pick up as the year progresses, hitting its stride by Christmas and heading into a period of steady growth.

One of the biggest PC games of the moment is the recently-released Black & White, which has been the biggest-selling game in the UK for the past two weeks, shifting 33,000 units in its first week on sale in the UK and another 25,000 in the second week. One of the game's notable features is that its detailed 3D graphics reward any hardware investment, to the point that some consumers could upgrade just to bask in the gaming experience.

Industry observers say there is a definite link between the PC chipmakers' focus on megahertz and games' thirst for power. "To a degree, [games] have been responsible for driving chip technology," said analyst Nick Gibson of Durlacher. "Look at 3D chip manufacturers: it is almost entirely games-driven innovation in that market."

The games market has been in a slump for the past few months, but that is due to change shortly. The slump is due to the changeover from one well-established set of games platforms -- Sony's PlayStation foremost among them -- to a new generation. The changeover means less demand for console games, which has a knock-on effect on PC games.

By the end of the year, though, Sony's popular PlayStation2 will be well entrenched, say experts, and Microsoft's Xbox and Nintendo's Game Cube will be launching, creating a new games boom for both consoles and PCs. This could help to prop up PC sales, since games tend not to follow the cycle of the computer market.

"Funnily enough, the games industry has historically proven anti-cyclical to the extent that it has bucked trends within recessions," said Gibson. "The last peak was [in the early 1990s], which was slap bang in the middle of a recession." That peak was based on the success of the Super Nintendo Entertainment System and Sega's Mega Drive.

Games aren't the only new applications that will make your PC seem obsolete in a few months' time. Besides increasingly power-hungry office applications and the upcoming Windows XP operating system, the Internet is increasingly driving demand for CPU power.

"Things like RealAudio and other media player type applications are becoming a lot more popular now," said analyst Jim Tully of Gartner Dataquest. "If you go onto a Web site now it's common to have the opportunity to play audio or video off that site. Even a couple of years ago that was fairly rare."

Intel, which helped fund the development of streaming media in its infancy, on Thursday announced an application allowing users to watch 3D simulations of real sports games over a dialup Internet connection.

Intel and AMD both announced earnings this week, with Intel seeing a 64 percent decline in revenues from the same quarter the last year. AMD sales were up 9 percent from a year ago, but predicted a slowdown.

Intel is releasing its latest, greatest Pentium 4 chip on Monday, which, at 1.7GHz, is nearing the 2GHz milestone -- but there is some doubt about whether high prices are worth the chip's fairly marginal actual performance gains.

Check out Gamespot UK's The Black & White Chronicles Post and share your gameplay experiences

See Chips Central for daily hardware news, including interactive roadmaps for AMD, Intel and Transmeta.

Have your say instantly, and see what others have said. Click on the TalkBack button and go to the Chip Central forum

Let the editors know what you think in the Mailroom. And read other letters.