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The SEGA NAOMI (New Arcade Operation Machine Idea) is a development of the Sega Dreamcast technology as a basis for an arcade system. The first Naomi hardware was demonstrated in 1998 at JAMMA as the successor to the Model 3 hardware. The use of mass produced hardware allowed for a sharp reduction in the cost of complete arcade cabinets.

Like the Dreamcast the Naomi has a Hitachi SH-4 CPU, a PowerVR Series 2 GPU, and a Yamaha AICA based sound system. It differs from the Dreamcast in that it has twice (32 MB) the system memory and twice (16 MB) the graphics memory. The key difference is that rather than use the GD-ROM disks of the Dreamcast the Naomi system has a ROM board capable of storing 168 MB of data. Because the Naomi does not use a CD format it has 6 MB of additional sound memory. Naomi boards can be used in special game cabinets (Naomi Universal Cabinet) where a theoretical maximum of sixteen boards can be used in a parallel processing format.

Games that used the first Naomi board included Crazy Taxi, Dead or Alive 2, Ferrari 355 Challenge, House of the Dead 2, Virtua Fighter 3, and Virtua Tennis. Around fifty games were written for Naomi boards.

The first Naomi board was succeeded technologically by the Naomi 2, debuted at JAMMA in 2000. It was basically similar to the Naomi board and had full backwards compatibility. However the PowerVR Series 2 GPU had been replaced with dual PowerVR CLX2 GPUs and a VideoLogic Elan chipset that offered transformation and lighting effects. The graphics subsystem has a total of 64 Mb of memory.

In addition the GD-ROM technology avoided for Naomi was offered through daughterboard expansion for Naomi 2 and Naomi, with additional memory to allow the entire game to be cached to speed-up load times.

Games specifically for the Naomi 2 include Club Kart, Virtua Fighter 4, and Virtua Striker 3.