ATI Technologies is to license its chips to third-party card manufacturers.

Analysts expect ATI's new partners to announce products and shipping dates at next week's Computex conference in Taiwan. The company manufactures the graphics processors for many of Apple's machines, including the iBook.

If enough companies decide to use ATI chips, ATI-based graphics boards could become cheaper, says Peter Glaskowsky, senior analyst for MicroDesign Resources.

"In retail, you'll be able to buy ATI-branded products and less expensive versions with the same memory for less," he said.

ATI's president and chief operating officer, David Orton, says this new licensing model is designed to boost the company's market share.

Slipping market share Analysts believe one reason for ATI's strategy shift is its slipping share of the graphics-processor market. As competitor NVidia's share has grown to nearly 50 per cent, ATI's share has fallen to 34 per cent over the last year.

"The market has changed, and it's now time for ATI to deepen its penetration into the system-integrator and distribution markets through this new strategy," Orton says.

"We decided that, instead of competing with other graphics-boards manufacturers, we should provide them with a choice. Now we're giving end-consumers and board suppliers a choice."

Dan Vivoli, vice president of marketing at NVidia, says the move is an indication that his company's business model is working. Dozens of retail and OEM boards use NVidia graphics chips.

NVidia has always licensed its chips to other vendors. However, it's widely known in the industry that the company dictates the design and engineering of third-party boards. ATI hasn't announced whether it will force its own design requirements on manufacturers.

ATI still plans to manufacture, sell, and support its OEM products, as well as retail and graphics boards, such as the All-In-Wonder Radeon and Radeon 64MB.

Company executives say the deal is designed to encourage creation of white box, non-retail graphics boards for sale to vendors – but that it won't stop manufacturers from selling ATI chip-based boards at retail and competing directly against ATI's own retail products.

"If other manufacturers decide to build retail boards, we're not going to fight them," Orton says. "But we could conceivably see an ATI Radeon ASUS graphics board on store shelves."

If third-party boards do end up in computer shops and for sale online, Orton contends that ATI's brand-name, service, and support will keep consumers loyal to ATI-branded boards.

Analyst Glaskowsky isn't so sure, though: "ATI may end up losing margins when people figure out there are cheaper graphics boards with the same configuration", he says.

"There isn't a lot of video-card maintenance," he says. "The advantage of having a branded product is not as substantial in the graphics-board business. This is a very dramatic change for ATI. If it supports this new model wholeheartedly, it may have to give up branded hardware."