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ATI Broadens Its Graphics World

Graphics chipmaker ATI expanded its reach into new markets this week with the help of a product launch and an acquisition.

The Markham, Ontario-based firm said it has finalized its purchase of CuTe Solutions out of Hyderabad, India. CuTe makes audio and digital media products that will help broaden ATI's offerings for consumer electronics devices and PCs, ATI executives said.

"By acquiring CuTe Technologies and establishing an ATI office in India, ATI has expanded its multimedia expertise to audio processing thereby strengthening its presence in the mobile phone market," the company said in a statement.

CuTe's audio products support more than thirteen codecs , all optimized for ATI's IMAGEON low-power-consumption and low-memory processor.

CuTe's offices in Hyderabad will also form the basis of ATI's new research and development center in India. The company said ATI Technologies India Private Limited will retain CuTe's staff and plans to hire additional engineers.

In a separate but related announcement, ATI introduced two new media processors with improved multimedia capabilities, the IMAGEON 2282 and IMAGEON 2182.

They feature CD-quality audio with high-quality stereo recording and playback in industry standard formats, including AMR , AAC , MP3, Real Audio, WMA and MIDI . The video engine enables a mobile digital video recorder/player and a 3 mega-pixel digital still camera. In addition, the IMAGEON 2282 provides video streaming and video conferencing functionality with picture-in-picture support.

The higher performance IMAGEON 2282 is targeted at the high mid-tier mobile phone segment while the IMAGEON 2182 targets the mainstream, low mid-tier segment. Phones powered by the new IMAGEON processors are expected to ship later this year from handset manufacturers, ATI said.

ATI's market moves may be coming at the right time. JupiterResearch's annual wireless forecast, published this week, found that 2003 ringtone revenues of $91 million more than doubled to $217 million in 2004. They're predicted to reach $724 million in 2009.

Likewise, mobile games revenues, which are graphics- and video- intensive, were $24 million in 2003, tripled to $72 million in 2004 and should reach $430 million in 2009.

Despite this rapid growth, JupiterResearch's report found ringtones and games accounted for just 10 percent of U.S. carriers' non-access data revenue in 2004, partly because ring one and game-capable handsets have not yet achieved very high market penetration. Overall, mobile data services revenue, including ringtones, games and messaging services, still represents only single-digit percentages of carriers' consumer revenue. But given the recent and projected growth, U.S. carriers have reason to be optimistic.

"During the next five years, the mix of data services will evolve, but messaging will still account for 65 percent of non-voice, non-data access revenues," Julie Ask, research director at JupiterResearch, said in a statement. "Carriers' premium content revenue mix will continue to diversify with the growing popularity of games, wallpaper, content and productivity applications. Ringtones will remain the largest revenue stream for carriers in the premium content category but will not dominate as they have in previous years."

ATI is obviously counting on its IMAGEON processors and its acquisition of CuTe's research and development centre in India to help capture that growing market.

"Just imagine the freedom of taking the functionality of your camcorder, MP3 player and digital still camera with you in a package that only weighs a few ounces," Ravi Gananathan, a senior product marketing manager at ATI, said in the company press release. "The new IMAGEON processors combine advanced audio and video processing capabilities to turn mobile phones into mobile entertainment centers."