A texture compression engine of a graphics device receives an uncompressed texture of a 3D graphic application. The received uncompressed texture is transcoded into an AVC reference picture stream. A plurality of mipmaps is constructed from the received uncompressed texture. The texture compression engine determines a texture compression rate based on available memory capacities. The texture compression engine compresses the received texture and its mipmaps at the determined texture compression rate. The compressed texture and mipmaps are further transcoded into the AVC reference picture stream and stored. The transcoded texture and mipmaps comprise either RGB or YCbCr components for a RGB uncompressed texture. The transcoded texture and mipmaps comprise monochrome or luma components for an ARGB uncompressed texture. A graphics accelerator in the graphics device is operable to acquire the stored texture and mipmaps for a 3D graphics scene. The acquired texture and mipmaps are decompressed by AVC decoding.