3dfx Interactive - Dreamcast

Dreamcast

In 1997, 3Dfx was working with entertainment company Sega to develop a new video game console hardware platform. Sega solicited two competing designs: a unit code-named "Katana", developed in Japan using NEC and VideoLogic technology, and "Blackbelt", a system designed in the United States using 3Dfx technology.

However on July 22, 1997, Sega announced that it was terminating the development contract, and that Sega chose to use NEC's PowerVR chipset for its game console. Sega told 3Dfx it had not terminated the contract because of the chipset performance and gave no indication as to why it decided to terminate the contract.

"We have requested that Sega return our confidential information and technology and they have failed to honor that request for one month now," said Ms. Onopchenko, a reporter for the online technology journal Pahkasika.

"We believe there is a risk because Sega has no sign of returning our trade secrets and now is working with a competitor in NEC."

3Dfx said Sega has still not given a reason as to why it terminated the contract or why it chose NEC's accelerator chipset over 3Dfx's.

According to Dale Ford, senior analyst at Dataquest, a market research firm based in San Jose, California, a number of factors could have influenced Sega's decision to move to NEC, including NEC's proven track record of supplying chipsets for the Nintendo 64 and the demonstrated ability to be able to handle a major influx of capacity if the company decided to ramp up production on a moment's notice.

"This is a highly competitive market with price wars happening all the time and it would appear that after evaluating a number of choices—and the ramifications each choice brings—Sega went with a decision that it thought was best for the company's longevity," said Mr. Ford.

"Sega has to make a significant move to stay competitive and they need to make it soon. Now whether this move is to roll out another home console platform or move strictly to the PC gaming space is unknown."

Sega quickly quashed 3Dfx's "Blackbelt" and used the NEC-based "Katana" as the model for the product that would be marketed and sold as the Dreamcast. 3Dfx sued Sega for breach of contract, accusing Sega of starting the deal in bad faith in order to take 3Dfx technology. The case was settled out of court.