In the last few years, both NVIDIA and especially ATI have made tremendous investments and progress in the handheld graphics processing market. In recent times, their solutions have began integrating more and more functionality, which made them nearly direct competitors to a vast number of companies they previously had no relationship with, including Broadcom, Texas Instruments and Qualcomm.

This market is relatively fast-paced and highly competitive, but also quite fascinating from a strategic point of view. With the progressive expansion of 3G and the already widely available 2.5G networks, as well as the increasing density of small-sized LCD displays, the mobile phone as a convergence device is likely to feel more and more like a high-quality entertainment device, as well as a partial competitor to ultra-mobile PCs and other non-DTR laptops.

At the same time, it is sometimes believed that the GPUs used in the Sony PSP and the Nintendo DS will be some of the last developed in-house rather than outsourced to the usual suspects. While not strictly aimed at the same market, similar requirements exist in that space, and it’s likely some of the same companies mentioned above will compete for these contracts. While NVIDIA and ATI are the most likely culprits given their previous relationships with Sony and Nintendo, other companies (including Imagination Technologies) certainly have some interesting things to bring the table, and thus also warrant some further pondering.

This article aims to give a general overview of the market, and the various factors that affect the decision making process, including economics, marketing and overall design efficiency. It does not focus on the 3D graphics part of things; such a subject would rather be treated in a follow-up article, as it is quite a different subject and more than sufficiently complex by itself.

It is important to realise that handheld chips are unlikely to be selected by manufacturers based on their gaming merits alone. Unless you’re thinking exclusively of IP companies that license their designs instead of manufacturing them directly, you really can’t consider one part of the market without considering the other nowadays. So even if you don’t normally care about things beyond the 3D market, understanding the market forces as a whole can provide extra insight, hence our analysis.

All in all, we’ve tried to keep the subject’s discussion relatively progressive and assumed little prior knowledge, so the result is involved – so please, dive in and enjoy the read!