Ten years ago there were more than 70 companies offering various types of graphics chips to meet the demands of PC users for ever more realistic images. Today the market is dominated by Nvidia, ATI Technologies and Intel, and most of the others have either gone out of business or been acquired.

The demand for more realistic 3D images is very strong, driven by PC games players and the developers of PC games. And the technology of 3D graphics processors has improved greatly in the past few years. Intel and Advanced Micro Devices, the two PC microprocessor makers, often boast about the complexity of their latest chips, but graphics chipmakers consistently produce very complex and powerful processors that are much more sophisticated than PC microprocessors, and which push the bounds of semiconductor technology.

And as PC game developers produce ever more realistic games, the demands for more powerful graphics chips will continue to grow. In contrast, there are few PC applications that require very powerful microprocessors.

In addition to the constant striving for more powerful chips, graphics processor companies typically have to update their products every six-months to match the new product introductions of computer makers. This is a gruelling schedule that has tripped up many former graphics chip companies. When they miss a product cycle, they frequently lose customers to rivals.

Nvidia has moved to the top spot through good execution, says Jon Peddie, chief analyst at Jon Peddie Research, a graphics chip market research company. "Nvidia has executed consistently very well and they now dominate the market," says Mr Peddie.

Its chief rival is Canadian-based ATI Technologies, which had once led the graphics chip sector. ATI, however, is fighting back and is well-positioned to regain market share. "ATI has completed a large reorganisation and introduced new graphics chip products and changed its business strategy, and it deserves a lot of respect for what it has achieved," says Mr Peddie.

ATI with its Radeon chip family has received recognition for the performance of its chips and has been winning customers in the notebook sector with about 62 per cent of that market, and 26 per cent of the desktop PC market.

Nvidia dominates the desktop market with about 66 per cent share and it is aggressively expanding into the notebook market. Although Nvidia faces some competition from a revitalized ATI, Wall Street analysts expect it to hold its own. "We do not think that Nvidia will lose market share to ATI," says Joseph Osha, analyst at Merrill Lynch.

Nvidia and ATI's main competition over the short term comes from Intel, which is preparing the release of an integrated chip set that contains graphics processing and is designed to work with its Pentium 4 microprocessor. This product had been delayed, providing a welcome boost for Nvidia and ATI. The integrated chipset from Intel will provide a lower cost of manufacture for PC makers and thus is likely to affect some sales for Nvidia and ATI.

However, the best margins are in the high-end of the market where Nvidia still dominates with it GeForce brand. This is where PC games enthusiasts are willing to pay $300 or more for graphics cards that boost the 3D display capabilities of their PCs and generate realistic game scenarios. Nvidia also has a large business in the video games console market through its agreement with Microsoft to supply the graphics processor for the Xbox.

Several years ago many industry analysts were predicting that Intel would dominate the graphics processor market because of its integration efforts and acquisition of graphics technologies and companies. Although Intel is a major force in graphics processing, in the low-end, it did not take over the market. "Intel just didn't understand the graphics processor market and it wasn't willing to commit the resources required to build that business," says Mr Peddie.

With the graphics processor market concentrated in the hands of three main suppliers, there is little chance for rivals to emerge. "Nvidia and ATI have snapped up all the graphics engineers. There is a huge barrier to competition. They also have the development tools."

However, a start-up called Bitboys may have a good chance of success. Unusually, this company is based in Finland and it claims to have a novel graphics processor architecture that significantly boosts 3D graphics performance. It has developed what it calls Xtreme Bandwidth Architecture technology, which allows its chips to produce 3D graphics images at a fast rate. Bitboys has a manufacturing agreement with Infineon Technologies, the European chipmaker, and its first chips should be out later this year.