Intel retained its lead in PC graphics chips during the first three months of the year, although the company faced increased competition from two key rivals, according to research figures released Friday.

ATi Technologies and Nvidia, which both provide graphics chips to the game console industry, have turned out increasingly sophisticated and sought-after graphics products for desktop and notebook PCs in recent years. Their main advantage is their work in developing graphics for the latest computer-generated movies and electronic games, and they’re catching a rising wave of users who demand better graphics quality for photos, games and video.

ATi is challenging Intel in the notebook segment in particular, according to new figures from Jon Peddie Research of Tiburon, Calif.

Overall, Intel maintained its global dominance in PC graphics with 39.1 percent of the market by volume. ATi followed with 28.7 percent, and Nvidia took third place with 19 percent.

Shipments of PC graphics chips expanded 25 percent from the same time last year, while laptop graphics rose 31 percent, according to the industry researcher. Approximately 74.9 million PC graphics devices, including chips and chipsets, were shipped from major suppliers during the first quarter of this year.

For related coverage, read Intel Unveils New Name for Chips and Intel to Foster Web Usage in Developing Nations.

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— Dan Nystedt, IDG News Service