In 2013, graphics-chip company NVIDIA (NASDAQ:NVDA) announced a technology called G-SYNC, a hardware solution that allows monitors to adapt their frame rates to the GPU, solving the problem of visual screen-tearing when the GPU and monitor are out of sync. G-SYNC monitors require a proprietary module from NVIDIA to function, adding a premium to the price, but reviews of the technology have been positive.
Advanced Micro Devices (NASDAQ:AMD) took a different approach, developing FreeSync, a royalty-free alternative that is an optional component of the DisplayPort 1.2a specification and requires no proprietary hardware. NVIDIA was first to market with G-SYNC monitors, but FreeSync monitors are now available, and both technologies provide an effective solution.
NVIDIA has an inherent advantage over AMD; during the second quarter, NVIDIA shipped a whopping 82% of all discrete graphics cards, according to Jon Peddie Research, leaving AMD with a paltry 18% market share. Since G-SYNC functionality works only with NVIDIA's graphics cards, and NVIDIA doesn't support the FreeSync standard, the majority of graphics-card owners don't have FreeSync as a viable option.
The wildcard in all of this is Intel (NASDAQ:INTC). While NVIDIA dominates the discrete graphics-card market, if processors with integrated graphics are included, Intel accounts for 75% of all graphics-chip shipments. Earlier this month, Intel announced that its future graphics chips would support the FreeSync standard. The timeline on when this would happen wasn't specified, but it's a big win for FreeSync nonetheless.
With both Intel and AMD getting behind FreeSync, NVIDIA's proprietary G-SYNC technology may be a lost cause.
A loss for NVIDIA, but not a win for AMD
G-SYNC was an attempt by NVIDIA to lock in its customers, creating a major incentive to stick with its graphics cards when it came time to upgrade. With NVIDIA already having a massive market share, if G-SYNC were to become the standard, AMD would have been at an even greater disadvantage.
NVIDIA has been attempting build an ecosystem around its graphics cards, and G-SYNC is just one component. NVIDIA's GeForce Experience software provides owners of the company's graphics cards a bevy of features, such as automatic optimization for different games, built-in game streaming to Twitch, and the ability to stream games to NVIDIA's SHIELD devices. The ultimate goal is to sell more graphics cards, and software is an area where NVIDIA has pulled out ahead of AMD.
G-SYNC certainly isn't dead yet, but a scenario where both G-SYNC and FreeSync are widely used now that Intel has backed FreeSync is difficult to imagine. One possibility is that NVIDIA pushes G-SYNC as a premium option while also supporting FreeSync, hoping to get buyers of its high-end graphics cards to buy G-SYNC monitors. This would require G-SYNC to be noticeably superior to FreeSync, and while there are some differences in performance between the two technologies, it's not clear whether that justifies the price premium.
If FreeSync becomes the standard, and NVIDIA abandons G-SYNC and adopts FreeSync, it will certainly be a loss for NVIDIA. But it's not really a win for AMD. AMD doesn't gain an advantage if FreeSync ultimately wins out; it simply avoids being put in an even worse competitive position. In other words, it doesn't help AMD sell more graphics cards.
The silver lining for NVIDIA is that it's unclear exactly when Intel's graphics chips will support FreeSync, and with its dominant discrete graphics market share, G-SYNC could still be viable for quite some time. But I think the odds that G-SYNC will ultimately win out against FreeSync are slim.
Timothy Green owns shares of Nvidia. The Motley Fool owns and recommends Intel. The Motley Fool recommends Nvidia. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.