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Squilliam said:

Why would Nintendo want this? For one it visually differentiates their console from the other two if they still use traditional raster methods of graphical rendering. Secondly it lowers production cost and simplifies the production of their games whilst producing higher quality images and thirdly Nintendo has always been more concerned about producing visually pleasing art work but they have never cared for reproducing realistic images in their games so they need not be concerned about whether their games stand up to a side by side technical teardown. Ray tracing may not give them the same visual complexity but it will make their games more visually pleasing which suits Nintendo of all companies pretty well.

Though I'm not a specialist on that matter, just commenting on the "differentiation" point. They've already differentiate themselves with the Wii, though that was a decision that paved the way to success for them, at the same time it made their relationship with 3rd parties rather complex. Most of them were unable to heavily capitalize on the Wii utilizing the new values the machine has to offer in vein of best-selling Nintendo games, struggling with traditional developement paradigma. If as you say ray-tracing won't create realistic images*, what do you think, how would this kind of technology impact 3rd parties, when they'll unable to create 'realistic' games, in which they made biggest investment? For them Nintendo only creating obstacles on their way.

*I didn't not really get why you labeled ray-tracing as unrealistic, or did you mean unrealistic at this point? Or I just misunderstood you?