Santa Clara (CA) - In December, we caught AMD representatives with various surprising statements dismissing a possible imminent buyout of Ageia. Common sense suggested that something was going on and that the company was trying to devalue Ageia. It didn’t take much to find that Ageia in fact was serious about selling the company and since yesterday we know that the buyer is Nvidia. The question is: Does this purchase make sense for Nvidia?
After a briefing with key members of Ageia at this year's CES show in Las Vegas, it was apparent that Ageia may be just about to switch owners. The company had its next-generation parts all in place, most noteworthy a PCI Express x4 card that was already running in chipset labs of several vendors. Even Intel was advertising its X38 and X48 chipsets featuring an Ageia “PhysX Expansion Slot” (PCIe x4). However, at CES, nothing was disclosed or announced.
The acquisition by Nvidia was officially announced yesterday, right after Wall Street closed. Ageia was a company in private hands and, as a result, Nvidia did not have to disclose the purchase price at this time. To find out, we will have to wait a few weeks until Nvidia files its 10-K with the SEC. However, industry rumors suggest that the purchase price was somewhere in the range of $150 million.
You could call Ageia a natural fit for Nvidia, in terms of the firm’s staff. Several founding members originally worked for Nvidia and left the company to launch Ageia. It is also worth to mention that Andy Keane, Nvidia’s general manager of the firm’s GPGPU (Tesla) unit, originally joined the green team from Ageia.
Despite its enthusiasm, the launch of Ageia was not as successful as hoped. While developing the PhysX PCIe card, Ageia found that several popular chipsets from Intel and Nvidia actually do not comply with PCIe v1.1 regulations due to too much noise. As a result, the PhysX PCIe card did not work. Given the fact that the company was new to market, it opted not to go into a war with the giants of the industry. Rather, a more friendly line was adopted and the PhysX card came to life as a PCI part. With today's motherboards not having room for any usable PCI slots, Ageia’s future was pretty much sealed.
Read on the next page: The state of physics computing
The state of physics computing
Back in 2006, ATI and Nvidia started a marketing battle demonstrating GPUs being used for physics processing: ATI used three Radeon X1900XTX cards and Nvidia two 7900 GTX cards to ramp up their physics capability. Both companies were caught on the wrong foot when Intel acquired Havok: Both concepts were utilizing Havok’s FX engine, which was “cosmetically affecting physics”, according to game developers we talked to.
A fully-fledged Havok engine is another ballgame. Even before its acquisition by Intel, Havok signed lots of customer contracts. Overall, there are around 150 Havok game titles, and the company's software was used in several movie productions like The Matrix, Poseidon or Troy.
When it comes to Ageia's PhysX, there were numerous statements and analysis that PhysX was a failure. However, the truth is actually quite the opposite. The PhysX hardware didn't exactly took off in spectacular fashion, but Ageia has been building a market with lucrative OEM deals and H2 2007 certainly was a golden period for the company. Ageia closed several good deals and we should not forget that there was a mobile part that came to life with the help Nvidia's MXM packaging. But, Ageia was aware that PhysX never can have an impact in the game industry it can’t get millions of cards into customer hands.
The actual success of Ageia is the PhysX SDK. PhysX is reportedly used in more than 140 game titles developed for Microsoft's Xbox 360, Nintendo's Wii, Sony PlayStation3 consoles and PC platforms. At the time of this writing, there were more than 10.000 active users of the PhysX SDK. Game developers who requested to remain anonymous told us that “PhysX is the best thing that can be utilized on a pathetically under-performing [Xbox 360] PowerPC processor”.
Before its acquisition, Ageia made some quiet purchase, including NovodeX and Meqon, two hot property engines. NovodeX was a smart deal since it was chosen by Epic, while Meqon was the brainchild of Swedish developers, then selected for the never ending story of Duke Nuk'em Forever and TimeShift.
With both Havok and PhysX being tied neck-to-neck, it is obvious that computing of physics is at a critical point. Let’s have a look.
Read on the next page: Why Ageia matters
Why Ageia matters
In order run physics effects on your PC today, you typically have to use the CPU, regardless of the platform you rely on. IBM's Xenon & Broadway, Sony Cell, Intel Core or AMD Phenom - all of these CPUs, however, have not yet shown that they can be capable physics drivers, so, in our opinion, specialized physics accelerators will be the solution for the future.
Even Intel has Larrabee, which is designed to become an all-purpose accelerator chip that is used for graphics as well as ray-tracing and physics, according to sources close to company. The second part of the equation is the development of next-generation game engines, which are going to drive implementation of real-world physics with next-generation consoles and PCs.
Let's look the public statements made in regards to the Nvidia-Ageia deal:
Nvidia released a following statement from Jen-Hsun Huang, co-founder and CEO:
“The AGEIA team is world class, and is passionate about the same thing we are - creating the most amazing and captivating game experiences. By combining the teams that created the world's most pervasive GPU and physics engine brands, we can now bring GeForce-accelerated PhysX to hundreds of millions of gamers around the world.”
Manju Hegde, co-founder and CEO of Ageia, released the following statement:
“Nvidia is the perfect fit for us. They have the world's best parallel computing technology and are the thought leaders in GPUs and gaming.”
True or not, the two statements refer to the present situation. But this deal was all about the future and controlling (or at least balancing) the world of physics computing, which set to march beyond the domain of games. Based on these statements, you might think that all currently-shipped GeForce products support PhysX, while the truth is that PhysX will be implemented in future chips, destined to be shipped in the hundreds of millions. Suddenly there is a pretty good reason for developers and publishers to jump on PhysX immediately.
Following the acquisition yesterday, we had the chance to talk to Tim Sweeney, founder of Epic Games and the brain behind the Unreal engine. Sweeney said that “we've had a great relationship with the Ageia team for years, and bundle their PhysX library with Unreal Engine 3 as its standard physics solution.” He added that he was “happy to see Nvidia jump in and throw its massive weight behind physics.”
Sweeney mentioned that he is planning to use Ageia physics features with “future Unreal Engine 3 games on all platforms.”
The “all platforms” note is particularly interesting. Hidden away from the eyes of public, engineers are creating next-generation Xbox, next-gen PlayStation and next-gen Wii titles. We managed to find out that all creative spirits of these projects are now hidden in caves, working hard on getting the new silicon for future parts. You can expect a new wave of consoles comes to come to market in the 2010/11 timeframe, even though conservative estimates are hinting to 2012 at this point.
But, clearly, Nvidia’s mention of “hundreds of millions of gamers” was a signal for the IT industry as whole. It will be driven in all major graphics application markets. When it comes to PC itself, Nvidia has several plans, seen in this author’s 2nd grade MSPaint skills in the picture above. The future is in physics being rendered on Nvidia's integrated chipsets and graphics cards.
The key to this strategy is not to think just about Intel or AMD processors, but a bit wider than that. If we are listening to the “rumors that could be true” department, we should to pay attention to the next-generation Sony console, which may integrate physics capability directly into Nvidia's GPU, which reportedly is not going to be the last-minute patchwork Nvidia had to deliver with the PS3 RSX GPU.
What makes this deal a sensible solution is the fact that Ageia has the engineers to take advantage of Nvidia's future hardware. You can bet the farm on the fact that future GPUs will have substantial input from Ageia's staff in terms of effectively channeling: Current GPUs have a deadly flaw in GPGPU terms – there are substantial performance penalties when branching is used.
At the other hand, CPU and PPU excel in branching, because there is enough cache to put “what-if” instructions and correctly predict what could happen. Intel knew that and is building Larrabee with massive cache in the middle, while Nehalem, Westmere and Sandy Bridge will continue to increase the overall amount of cache, while re-introducing Hyper-Threading, enabling up to 16 threads on a single socket.
It is too early to say what will be the first GPU influenced by Ageia's engineers, but we expect that some influence might already be seen in the high-end graphics chip coming in 2009.
Read on the next page: Nvidia inside
At the end of the day, the Ageia acquisition could be another lucrative acquisition for Nvidia that can be traced down to Jen-Hsun Huang, known to industry insiders as an extremely dedicated individual who is lucky enough to have the whole company behind him.
The reason for this almost fanatical fellowship at Nvidia lies within some publicized events in Nvidia's past. For instance, when Nvidia has hit with the trouble surrounding the GeForce FX, Jen-Hsun Huang and the executive decided not to fire anyone. Cost-cutting was mainly done on the executive level, but unlike Apple's $1 salary, this move was not advertised at all. All of the executives did not took any bonuses and invested heavily in the company, also reducing their salary to the legal minimum (read: Steve Jobs salary minus the stock options), just to get through rough weather. The storm did not last for long, but the executive team got a massive payoff: The whole company is now said to stands by its leadership and the constant expansion only speaks of the power the company now has.
When AMD acquired ATI, several industry insiders and analysts were quick to say that Nvidia's days are over. With Intel Larrabee on one side and AMD Fusion on another, wiping out Nvidia was expected to be a walk in the park. However, today Nvidia is a billion dollar per quarter company. We have often said that we expect GPGPUs the next big thing and Nvidia’s CUDA is in place to take advantage of this trend. Nvidia’s current market cap is $14.46 billion, while AMD is at $4.59 billion.
Sadly for Jen-Hsun Huang, Nvidia could not took over AMD, since he reportedly was unable to generate support for the move – despite he publicly always said that he isn’t interested in CPUs, but wanted to focus on graphics instead. We heard that the debt-to-equity ratio was too big for the current size of the company. It will be interesting to see what will happen when Fusion and Nehalem arrive on desktop and mobile platforms. There have been talks that AMD could become an interesting acquisition target once cost is under control and there is more visibility how effective its roadmap will be. There may be another chance for Huang.
With integration of PhysX into its products, Nvidia is providing a clear signal that the nForce chipset is not going anywhere and that the company will continue to squeeze the CPU to the point where the CPU is just another component of a computer, regardless of Intel's plans to integrate everything into Nehalem/QuickPath interface (formerly known as CSI: Santa Clara or Nehalem's direct interconnect like Hypertransport). The only thing that Nvidia will have to be careful about are FSB licenses. If that is the case, the company will continue to be a formidable rival.
Read on the next page: Nvidia claims a key spot in next-generation console and PCs
Conclusion: Nvidia claims a key spot in next-generation console and PCs
For starters, Intel is prepared for battle. The company paid a hefty price for Havok, but it had a one-year head start and its ace remains the Westmere/Sandy Bridge CPU in combination with the Larrabee cGPU. AMD will integrate the GPU with a CPU in a project named Fusion, but the company has a Lego block approach, so additional computing units are not excluded.
Right now, it looks to us that Nvidia may have made just another smart acquisition and Ageia could turn out to be another 3dfx or ULi Technologies, companies Nvidia ate ages ago.
Gamers will now get hardware physics, Nvidia gets another set of technologies to toy with, and the competition is more than alive. Cards are dealt and the game is about to begin.