Nvidia Has Big Plans For Android and Tablets

Mr. Huang is a Taiwanese immigrant, one time table tennis champ and Stanford-educated electrical engineer. Back in 2006 he took a chance on a graphics chip that would eventually give his company the lead when it came to the best computing power used in movie making and science. Before all that, in 2003, he energized Nvidia after it lost a deal for supplying a graphics chip for the Microsoft Xbox.

Now in 2011, Mr. Huang wants the company to make another change. This time beyond graphics to building chips that power devices such as smartphones and tablets.

“We used to be a PC graphics company, only PCs, only graphics,” Mr. Huang said in an interview last week. “We have reinvented Nvidia.”

This is the perfect time to change direction for the company. Tablets are growing, as PC sales have been slowing down. The technology in PCs have been changing and in turn, threatening the Nvidia’s old market. Intel and Advanced Micro Devices both sell main processors that already include the graphics abilities, which cuts out the need for add-on graphics processors, and has already started to take away some of Nvidia’s sales.

“We are well positioned to go after a market opportunity that is sixfold the market opportunity of the Nvidia you knew from the past,” Mr. Huang recently told analysts.

One of these plans incude the Tegra 2, which is the company’s latest chip for mobile devices. This chip is based on the power efficient chip that is structured from ARM Holdings, and has started to appear in numerous devices such as the Droid X2, and the Samsung Galaxy Tab 10.1. Both of which run on Google’s Android operating system. Mr. Huang sees Nvidia becoming as important to Android as Intel has been to Windows PCs which will be great for sells.

However, there are few people in the chip industry that are dismissing Mr. Huang’s idea.

“There’s a lot of uncertainty about how they are going to outgrow their core graphics business,” said Rajvindra Gill, an analyst with Needham & Company, which recently downgraded Nvidia’s stock to hold from buy.

However, in a world where technology is ever changing, this plan is needed to be able to keep up with the times.

According to a recent report from Jon Peddie Research, it shows that Nvidia’s share of the market for graphics processing, including integrated and stand-alone chips, has dropped eight percent year after year and during the first quarter to nearly 20 percent. On the other hand, A.M.D.’s share of the graphic chip market has rose to three percent, while Intel’s rose almost five percent.

The PC market is slowing as well. Gartner perdicts that worldwide PC sales will increase by only 10.5 percent, to 388 million units, this year. This is far below the forecasted 15.9 percent it made almost six months ago.

During the first three months of the year, Gartner had reported that the PC industry has shrunk by nearly one percent, with some industry analysts are saying that it has decreased more than that.

The problem is a growing market in the United States, a decline in the demand from corporations and also a growing consumer demand for tablets.

So far, Nvidia’s plan has worked out for them. The company has reported $100 million in sales of their Tegra 2 during the first quarter, which is only months after first releasing the chip.

A settlement back in January having to do with a patent dispute with Intel has also helped the company. Intel agreed to pay Nvidia $1.5 billion over the next five years. Nvidia can expect a payment of about $66 million each quarter from Intel in exchange for Intel’s use of Nvidia’s patents. This will more than likely help in the development of better and more chips.

To help push them further into the mobile market, Nvidia has also agreed to pay $367 million for Icera Inc., which should help connect mobile devices to cellular networks. Having their own baseband technology will help Nvidia compete with Intel and Qualcomm, who happens to be the leader in mobile chips at the moment.

With the help of Icera’s technology, Nvidia will be able to easily create products that combine microprocessor and communication technology,which will in turn, help bring down the price of the chips along with their size.

Nvidia might also be able to find an opportunity within Microsoft’s plans to make a version of their Windows Phone operating system for ARM chips. This will help open the market for Nvidia’s Tegra 2 chips in phones and tablets that could possible one day run Microsoft’s operating system, which includes Nokia phones.

For now, Nvidia is sticking to Android devices. Although Apple does use Nvidia chips in their MacBook Air, the company mainly uses their own custom chips in their iPhones and iPads.

Many of the smartphones that use the Tegra 2 chips have been big sellers, with more customers being added all the time. At CES in January, Motorola had unveiled the Droid Bionic along with the Atrix 4G, while LG showed off their Optimus 2x , all of these based on Nvidia’s Tegra 2 chip.

According to Mr. Huang, the earlier tablets that used Android and have been on sale since last year,  have suffered from high prices, along with a lack of compelling applications and also a  shortage of knowledgeable retailers.

However, he predicts that these issues will not be a problem in the next wave of Android tablets which are due later on this year.

These new tablets could possible use the company’s quad-core processor, a chip with four processors in one, he said.

We will be seeing the Tegra 2 chips in the latest tablet that has been announced, the Eee Pad Transformer TF101, which is a laptop that turns into a tablet.

Mr. Huang is certain that new Android tablets will help Apple’s competitors beat out the iPad who currently sits at the top.

“In a couple two to three years I can imagine Android operating half the world’s tablets, if not more,” he said.

Others happen to agree, Jefferies, an investment bank and research company, says that by 2014, Android tablets will outsell iPads by about 40 million units.

If Mr. Huang’s plans go accordingly, Nvidia will be in many of them.



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