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NVIDIA CEO Jen-Hsun Huang (right) may be outspoken, but he skillfully guided his company into a major new business, overseeing NVIDIA creation of mobile CPU lines.  (Source: Reuters)

NVIDIA recently acquired Icera, a major maker of Android modem chips. The move will allow NVIDIA to incorporate modems into its SoC designs, staying competitive with rival Qualcomm.  (Source: Icera)
NVIDIA currently owns over a major share of the smart phone market and tablet market

Chipmaker NVIDIA Corp. (NVDA) went through a major overhaul in developing a new line of business: mobile CPUs.  It launched its first smartphone CPUs in 2008 and saw only moderate traction.  But it soldiered on, launching Tegra 2 in January 2010, a product which brought it far greater success.

I. Get Mobile or Get Out

NVIDIA's outspoken Chief Executive Jen-Hsun Huang is now a major evangelist for the mobile market.  He warns in a CNET 
interview, "If you don't have a mobile strategy, you're in deep turd. If you're not in mobile processors now, you're seven years too late."

He singled out Hewlett-Packard Comp. (
HPQ) as a company with a lack of mobile vision.  Hewlett-Packard announced its intention to try to exit the consumer electronics market a few weeks ago, making plans to spin off its consumer PC/Printer division and killing its first tablet after only seven weeks on the mark.  While he did not say it, he perhaps also was alluding to long-time rival Advanced Micro Devices, Inc. (AMD), who still refuses to target the smartphone business.

Mr. Huang also had harsh words for competitor Intel Corp. (
INTC), who has struggled to bring mobile products to the market.  He believes that compatibility will be a major issue for Intel's low-power Atom CPU line, as it's an x86 architecture and the majority of smartphone apps are compiled for ARM processors like Tegra.  He remarks, "They're speaking the wrong language. We're not worried about them at all."

II. NVIDIA Slow Gathering Market Share

NVIDIA begrudgingly respects rival mobile CPU maker Qualcomm, Inc. (
QCOM), who most estimate is still narrowly ahead of NVIDIA in the smartphone chip sales.  NVIDIA's CEO brags, "We're the only person actively on the dance floor with Qualcomm."

An estimated 70 percent of Android tablets and 50 percent of smart phones contain Tegra 1 or 2 series chips.  Qualcomm still has an overall edge in the mobile market as its wireless modem chips are even used in designs with rivals' CPUs, such as the iPad 2.

The remark does neglect 
Samsung Electronics Comp., Ltd. (SEO:005930) whose proprietary Exynos processor design is sold in the company's best-selling smart phones, with a similar Samsung design also found in Apple, Inc.'s (AAPL) iPad 2, which currently owns around 70 percent of current tablet sales.

III. The Future

Looking ahead, NVIDIA recently began shipping its Kal-El quad-core Tegra 3 chip, aimed primarily at tablets.  But perhaps more importantly, in May NVIDIA acquired fellow mobile chip-maker Icera for $367M USD in cash.  

The purchase gives NVIDIA the capacity to put wireless modems into its system-on-a-chip, similar to its rival Qualcomm.  Previously NVIDIA lacked both the licensing permissions and the expertise to do this.

NVIDIA expects the mobile market to eventually become its most important business.  While the graphics market is only expected to grow 75 percent by 2015 to $7B USD, the mobile chip business is estimated to grow over 1,000 percent in that same time frame to reach $20B USD.  By 2015 the number of smart phones in the wild is projected to rise from 100 million to 1 billion, worldwide.

Still, NVIDIA plans to stick with the graphics business as well, where it perceived strong sustained demand for better graphics.  Mr. Huang compares graphics current position to that of digital SLR cameras, pointing out that while they didn't see growth like smart phone point-and-shoot camera modules, they also weren't hurt by the push to mobile.  NVIDIA is bullish on the idea of general purpose GPU (GPGPU) computing, a burgeoning field.

The company is sitting on a $2.5B USD surplus of cash and says it may be considering more acquisitions.  Mr. Huang offered a surprise when he said NVIDIA might consider buying internet startups with the cash.  He says that while large internet service companies are becoming overpriced, many startups are still quite attractive.

An NVIDIA social network or blogging service?  That's an odd thought.  But then again, most wrote the company off when it first jumped into mobile.





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