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GlobalData Thematic Research

Providing actionable insight into the world's biggest industries

Why Nvidia is well-placed to lead the fast-growing gaming chip market

Back in March, Google declared that “the future of gaming is not a box – it’s a place” as it unveiled a new Stadia service which will allow gamers to play on any Android or Chrome-based device.

A few days later, Apple announced a subscription service, Arcade, that enables users to play games via the internet instead of buying their own standalone console or gaming PC.

In 2018, the video games market was worth more than $130bn. By 2025, it is likely to have become a $300bn-plus industry, according to GlobalData figures, having grown at a compound annual growth rate of 13 per cent between 2018 and 2025.

GlobalData’s recently published ‘Video Games’ report argues that mobile gaming has already outstripped the console and personal computer (PC) markets. With the increased maturity of streaming (supported by the growth of 5G), cloud services, and mobile esports, together with the fact that mobile platforms are close to technical parity with their PC and console rivals, more gamers are expected to shift towards mobile gaming platforms, driving the expansion of the market to over $100bn by 2022, up from $55bn in 2018.

The video games industry is now over 70 years old, and it continues to evolve and thrive, driven by changing user demands, new channels, and technical innovation. One of the first games, in 1958, was Tennis for Two, before the commercial video game industry started to take off in the early 1970s. In 1971, Bill Pitts and Hugh Tuck developed a coin-operated computer game, Galaxy Game, at Stanford University using a DEC PDP-11 computer with vector displays.

The industry is now in the throes of transforming itself from a product-oriented business to an as-a-service model. Change will be spurred by new technologies such as 5G, cloud, and virtual reality (VR) which are expected to usher in a new phase of innovation. At the same time, new business models, such as support for in-game micropayments, are starting to change the economics of gaming.

Cloud gaming is now evolving into a global phenomenon, with major games companies bidding to become ‘the Netflix of games’, driven by rapidly increasing viewership on existing streaming channels. However, latency and bandwidth limitations will serve as a brake on the development of mobile gaming services. The maturing of cloud technologies and development of 5G will reduce these network issues, creating an increasingly competitive market in which several leaders have already emerged.

Who will be the key companies driving this growth, particularly in the semiconductor space? Theme-based research from GlobalData has marked out graphics chipmaker Nvidia as one of the world’s leading semiconductor companies best placed to succeed in the fast-growing gaming arena in the next two to five years.

According to GlobalData’s latest Semiconductor Sector Scorecard, gaming is one of the top ten themes that will impact the semiconductor sector, alongside data centres, high-performance computing, AI, autonomous vehicles, Industrial Internet, ambient commerce, 5G, M&A and geopolitics.

Cyrus Mewawalla, GlobalData Head of Thematic Research says: “Despite being over 70 years old the video games industry continues to evolve, driven by changing user demands, new channels, and technical innovation.

“Today’s video games industry is in the throes of a huge transformation from a product-oriented business to an as-a-service model. At the same time, new technologies like 5G, cloud, and virtual reality (VR) will usher in a new phase of innovation, while new business models, like support for in-game micropayments, are already changing the economics of gaming.”

GlobalData’s latest ‘Semiconductor Scorecard’ analyses the major technology, macro-economic, and regulatory themes impacting semiconductor companies and reveals that Dutch supplier ASML, which manufactures machines for the production of integrated circuits, and Microsoft also make the select group of three leading companies in the gaming theme.

Mewawalla continued: “Companies who invest in the right themes become success stories with those who miss the big themes, ending up either falling behind their competitors or failing altogether.

“The games industry’s swift progression towards streaming is influencing chip manufacturers to develop enhanced graphics and integrated streaming features to support gaming.

“Cloud gaming is evolving into a global phenomenon. Major games companies are racing to become the Netflix of games, driven by rapidly increasing viewership on existing streaming channels. However, latency and bandwidth limitations will serve as a brake on the development of mobile gaming services.”

Rapid growth in investment from Microsoft, Google, Sony, Tencent, Nokia, EA, Nvidia, and Loudplay, among others, is currently stimulating growth of the cloud gaming market.

Mewawalla added: ‘‘History is littered with great companies who disappear because they miss the key themes in their industry. And gaming has become a disruptive theme.

“The video games industry is booming, driven by a combination of trends, including the popularity of relatively new platforms like the Nintendo Switch and advances in technology that have enabled the development of bigger more immersive games.

“The introduction of reliable high-quality streaming services is likely to be the most important technological theme for video games companies in the coming year. Streaming has already caused major disruption in the music, film and TV industries and it could have just as big an impact on the video games sector.”

What is thematic research?

Viewing the world’s data by ‘themes’ makes it easier to make important decisions.

GlobalData’s thematic research team has developed a ‘thematic engine’ which is designed to identify tomorrow’s tech leaders rather than today’s tech incumbents, based on their competitive position in the most important themes impacting their industry. The GlobalData thematic engine spans 15 key technology sectors – from semiconductors to consumer electronics to enterprise software – and covers over 60 themes.

The full universe of 57 semiconductor companies covered by GlobalData’s Semiconductor Sector Scorecard are:

  1. Aixtron
  2. Alibaba
  3. Alphabet
  4. Amazon
  5. AMD
  6. AMS
  7. Analog Devices
  8. Apple
  9. ASML Holding
  10. Baidu
  11. Barefoot Networks
  12. Broadcom
  13. Cambricon
  14. Cirrus Logic
  15. Cypress
  16. Dialog
  17. Diodes
  18. Graphcore
  19. Himax
  20. IBM
  21. Infineon
  22. Intel
  23. Marvell
  24. Maxim
  25. MediaTek
  26. Melexis
  27. Mellanox
  28. Microchip
  29. Micron
  30. Microsoft
  31. Monolithic Power Systems
  32. Nanya Tech
  33. Nvidia
  34. NXP
  35. On Semiconductor
  36. Qorvo
  37. Qualcomm
  38. Realtek Semiconductor
  39. Renesas
  40. Rohm
  41. Samsung Electronics
  42. Silicon Labs
  43. Silicon Motion
  44. SK Hynix
  45. Skyworks
  46. SMIC
  47. Softbank
  48. STMicroelectronics
  49. Teradyne
  50. Tesla
  51. Texas Instruments
  52. Tokyo Electron
  53. TSMC
  54. UMC
  55. Vanguard
  56. Xilinx
  57. Zeno

This article first appeared on Verdict, which is part of the same group as NS Tech and GlobalData. Download the full report here.