3dfx Interactive - Cause of Decline

Cause of Decline

The cause of 3dfx's decline is a debated topic assuming several factors contributed in some measure. One of the first reactions was that there were rare claims that the company spent too lavishly on employee perks including unsupported reports of spending $30,000–50,000 on company lunches and other non-essentials each month, even up to the last two weeks before closing its doors. Others state that these expenses were simply umbrella figures and entirely legitimate during the consideration of a sell. Not just fine dining and lunches, but luncheons over a period of time which is very typical for any large company.

Second, the company prioritized its next-generation designs and resulting high-end products, frequently ignoring the mid and low end sectors. Nvidia chose comparatively short development cycles, typically releasing a new product line each cycle and a high-end refresh midway through, and generally had a product priced to suit each market segment as older products and technologies moved progressively down-market. ATI quickly adopted a similar schedule. 3dfx however pursued lengthy, ambitious development cycles on higher end products and then attempted to fill in the down-market sectors with detuned versions of the newest release. This strategy eventually faltered as Nvidia and ATI cards built successively upon earlier gains, eventually exceeding 3dfx in overall performance. Nvidia's flagship GeForce 256 and GeForce 2 GTS are often given credit for the demise of the competing Voodoo 3 and Voodoo 5, respectively, but it is also important to note that the GeForce 2 MX midrange derivative was what successfully targeted the mass-market. The MX acquired substantial market share for Nvidia, and 3dfx's reaction, the Voodoo 4 4500, was uncompetitive in both price and performance when finally released.

Third, although 1997 was marked by analysts as a turning point for 3dfx due to the marketing led by the new CEO Greg Ballard, there was criticism of Ballard's understanding of R&D in the graphics industry. Single-card 2D/3D solutions were taking over the market, and although Ballard saw the need and attempted to direct the company there with the Voodoo Banshee and the Voodoo3, both of these cost the company millions in sales and lost market share while diverting vital resources from the Rampage project. Then 3dfx released word in early 1999 that the still-competitive Voodoo2 would only support OpenGL and Glide under Microsoft's Windows 2000 operating system, and not DirectX. Many games were transitioning to DirectX at this point, and the announcement caused many PC gamers–the core demographic of 3dfx's market–to switch to Nvidia or ATI offerings for their new machines.

Fourth, the merger with STB alienated 3dfx from much of its previous market, and never developed into the right kind of arrangement to broaden 3dfx's distribution base from what the company had when still acting as a chipset supplier to third parties. The merger consequently diverted vital resources from 3dfx's chip development operations without ever producing a corresponding payback in sales.

Fifth, the next-generation "Rampage" project was exceedingly ambitious and delayed repeatedly as the company continued to vacillate on its commitment to Rampage development versus short-term retail products, such as the Voodoo 3 and Napalm/VSA-100. The Rampage design team was using a pioneering synthesis tool set which was still under development as the design proceeded. Originally scheduled for demonstration at the 1998 Comdex event, the first functional samples of the product only debuted in 3dfx's labs in December 2000. The 2D and 3D driver software was already up and running to support the test hardware, but the impending release of Rampage was too little, too late. The deal to "wind down" the company and transfer core assets to Nvidia was less than 2 weeks from closure at that point.

Sixth, 3dfx never incorporated scan test structures into their chips, without which thorough post production chip testing is impossible, removing the possibility of yield diagnostics. This is also noted by the purchasing party (nVidia) that incorporate such tests and continue to have lower yields than prospected although said "needed" test is mandatory for thrusting yields.

While some have speculated that shipping the "Rampage" might have saved 3dfx, the fact remains that the company never mastered the new concept of relatively cheap, high-performance designs with integrated 3D acceleration, which was rapidly becoming the de facto standard of PC graphics vise 2D. The success of "Rampage" would not have simply depended upon raw performance and the up and coming public awareness based on reviewers moving to the web, but also the cost of manufacturing. It remains unknown whether "Rampage" would have been a practical product, let alone enough to keep the company alive in the card industry.