nVidia is to acquire PortalPlayer, which makes semiconductors and software for digital music players and other devices, in a bid to expand from its core success in selling graphics cards.

nVidia will pay $357m (about £190m) for the company, which makes the chips inside SanDisk's Sansa c200 and e280 MP3 players. The company previously supplied chips for Apple's iPod music player, but reportedly lost that business in April.

nVidia plans to use its new subsidiary to expand into new business sectors, combining its own GPUs (graphics processing units) with PortalPlayer's microprocessors to target PMPs (personal media players), PDAs, portable game players and mobile phones. The acquisition has been approved by the boards of both companies and is now subject to the usual sorts of regulatory approvals. A date for its completion was not provided by Nvidia.

The move will augment Nvidia's own handheld electronics division, which designs power-efficient graphics and video units for mobile phones from Motorola, Samsung, Kyocera, and Sony Ericsson.

The strategy is similar to the one followed by ATI, which agreed in July to be acquired by processor maker AMD. AMD plans to integrate its microprocessors with ATI's chipsets and graphics chips, allowing it to better compete against Intel.