NEC Corp is planning to spend $761m to build a fabrication plant in Southern Japan that will manufacture graphics and memory chips worth $2.85bn for Nintendo Co’s new games console, the Dolphin. Work will start on the plant next month, with chip production starting next August. The Dolphin is expected to be in the shops by the end of 2000 – about the same time as the Sony Playstation 2 will hit the market.
The deal is good news for NEC, which said in February that it would be cutting 15,000 jobs over a three-year period. It already manufactures the graphics chips used in the rival Dreamcast box from Sega Enterprises. The graphics accelerator used in the Dolphin was designed by California start-up ArtX Inc.
This year, Sony Corp and Toshiba Corp have spent over $0.8bn on similar venture to build chips for the Playstation 2 (CI No 3,612). Companies are shouldering the heavy costs of fab building to ensure a steady supply of the chips and because of the market possibilities inherent in this new generation of consoles. The potential market is huge, said Peter Glaskowsky, analyst at the Microprocessor Report, perhaps a billion units over the next ten years. These new boxes will work as video-game machines, TV channel guides, CD and DVD players, cassette deck replacements (with the added benefit of MP3/SDMI convenience), and living-room internet-access terminals. With optional components these new systems will replace the Replay/Tivo boxes (and therefore the VCR), the HDTV tuner box (of which several hundred million will be sold by 2006), and telephone answering machines in many households.
Indeed, Glaskowsky thinks that the new consoles have been designed so that they have a wide appeal beyond what has traditionally been looked upon as the games market. Look at the industrial design of the Playstation II. Does it look like a game console? he asks. Nope. It’s a relatively calm, sober little box, like a small PC or a stereo tuner. I bet tens of millions of these things will find their way into homes without children, and sit on or near the TV to perform all kinds of functions that have nothing to do with video games.
