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From what I have heard around here, that is not true, though it's something I'd like to believe. If anyone can confirm this, then I will have restored my faith in believing in external DACs like the FiiO E10 is much better than something like the Xonar DGX or even the Essence STX.
It is not quite true. Here are some links to measurements of the FiiO E10, Xonar D1, and Xonar Essence STX. While they are not directly comparable, as the tests are not exactly the same, and were done with different equipment, the differences are large enough to make it clear that objectively the E10 is the worst of the three as a DAC:
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Xonar Essemce STX
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Xonar D1
- FiiO E10 - link not allowed here, but search for '"FiiO E10 DAC" measurements', and check the blogspot.com link
However, it should be noted that headphone amplification is often not very good on sound cards, and an external amplifier may be necessary. There is no real technical reason for this, the manufacturers simply do not care much about headphone support, and sound card reviews tend to overlook it as well. Many external DAC+amplifier devices do not have particularly good headphone outputs either, though, but at least the FiiOs tend to be decent in this respect, especially considering their price. The Essence STX drives high impedance headphones well, but for some low impedance ones the amplifier on the E10 might in fact be better.
From a technical point of view a DAC can be good regardless of whether it is internal or external, but here is a short list of typical differences in practice:
Advantages of internal sound cards:
- often lower price for the same or even better DAC specs
- more features (multichannel output, recording (ADC), surround sound, etc.)
- fewer boxes and cables on the desk
- more widely available than "boutique" audiophile products by small companies
Advantages of external DAC(+amplifier)s:
- the built-in headphone amplifier (if any) is often better
- interference and ground loop problems are less likely or can be fixed better (with USB isolators or optical S/PDIF)
- transportability
- no proprietary drivers are needed on Windows (this is not always the case)
- no PCI or PCIe slot is needed
Also, the highest end DACs are external, but an expensive DAC is in fact most likely overkill, and it is possible to achieve transparent DAC performance (where humans can no longer tell apart the DAC from a near-perfect "reference" one under controlled conditions) at a surprisingly low cost. It is better to spend the money on headphones or loudspeakers, those make much more difference.
Actually, even onboard audio (at least the DAC part) is not always quite as bad as commonly believed. If it uses a reasonably good codec chip, and is well implemented (there is no audible interference or other problem - unfortunately, often there is), then it can already be not so easy to tell apart from a technically higher quality sound card or DAC.