Chicago (IL) - ATI and Nvidia remain focused on their discrete graphics card business, but apparently expand their reach into lower margin areas to increase production volume: While Nvidia is preparing the launch of its C51 integrated graphics processor (IGP), ATI convinced Intel to use its Xpress 200 chipset on entry level Intel-branded boards, sources told Tom's Hardware Guide.

Despite much media coverage of the graphics industry is focused on ATI' and Nvidia's battle for the highest performing chips, the leadership in total market volume is wrangled out on a different field. In fact, both ATI and Nvidia are trailing Intel in terms of shipped graphic chips by a wide margin: Simple IGPs allowed Intel to reach a 43.7 percent market share in the second quarter of this year, according to Jon Peddie Research. ATI follows as a distant second with 26.8 percent, Nvidia's so-far non existing IGP business resulted in only 15.9 percent market share in the overall graphics chip market.

According to sources, this scenario is likely to change in the near future. While Nvidia is currently prepping its debut, ATI has the Xpress 200 IGP in the market for about 10 months (7 months for Intel platforms). As it appears, Intel now has decided to use the Intel edition of the chipset for entry level boards, most likely upgrading the 845/865 AGP-based boards as well as supporting 915GL PCI Express boards. In either case, Intel will integrate the Xpress 200 in an Intel-branded, entry-level board.

Dean McCarron, an analyst with Mercury Research, said that such a move would have a "negligible impact" on Intel's business and actually support its current situation: "Intel has openly discussed that its chipset production has been running at more than 100 percent of capacity." As a result, the company would need to outsource some of its lower-end chipset business: "It does not make much sense producing lower end chipset when they can make more money with more expensive products."

On the other hand, Intel's move "creates opportunity," McCarron said. While the ATI-equipped Intel board is very likely to be a high-volume product, the deal is "much more a "revenue enhancer than a profit enhancer", McCarron said. "Chipsets have much lower margins than standalone graphic cards."

While there have been rumors about Intel talking to other IGP suppliers, including SiS, the move to the Xpress 200 makes sense for Intel: Not only is it the only available DX9 PCI Express IGP for Intel platforms - Intel products left aside - but it has been shipping for quite some time and ha proved some reliability in the industry.