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Nvidia cites ongoing 'failure' problem in some laptops

In a filing with the Securities and Exchange Commission, Nvidia says that some notebooks continue to have "failure" issues.

Nvidia said that some notebooks with its chips continue to have "failure" issues, in a filing with the Securities and Exchange Commission on Wednesday.

In the Form 10-Q filing, Nvidia stated that though it does not continue to see "abnormal failure rates" in systems using Nvidia products," some notebooks are still affected.

Specifically, Nvidia said: "We continue to not see any abnormal failure rates in any systems using Nvidia products other than certain notebook configurations. However, we are continuing to test and otherwise investigate other products," Nvidia said, adding, "there can be no assurance that we will not discover defects in other MCP or GPU products." (MCP stands for Media and Communications Processor; GPU stands for Graphics Processing Unit.)

On July 2 of last year, Nvidia announced it was planning to take a one-time charge to cover costs associated with problems with materials used in certain versions of its laptop graphics chips. Subsequently, a $196 million charge was recorded in the second quarter of its 2009 fiscal year to "cover anticipated customer warranty, repair, return, replacement and associated costs" with the problem.

In the 10-Q filing, Nvidia cited a "balance of $145.7 million associated with incremental repair and replacement costs from a weak die/packaging material set." and "$31.2 million for the three months ended April 26, 2009 in payments related to the warranty accrual associated with incremental repair and replacement costs from a weak die/packaging material set."

Nvidia paid or incurred $50.3 million against the original "warranty accrual" in its fiscal third quarter and fourth quarter 2009, such that the remaining balance of the "bump-crack accrual" (defect) was $145.7 million at the end of its fiscal fourth quarter, according to Nvidia.

Nvidia is also grappling with insurance companies over payments to PC makers for GPU failures, according to reports.

As early as 2007, Hewlett-Packard listed laptop models affected by the graphics chip glitch. In August 2008, Dell also listed affected models. And Apple said in October that it would repair faulty graphics chips.

In the 10-Q filing, Nvidia also stated (some cases were cited in previous Nvidia filings) that "in September, October and November 2008, several putative consumer class action lawsuits were filed against us, asserting various claims arising from a weak die/packaging material set in certain versions of our previous generation MCP and GPU products used in notebook systems."

Most of the lawsuits were filed in federal court in the Northern District of California, but three were filed in state court in California, in federal court in New York, and in federal court in Texas, Nvidia stated. "Those three actions have since been removed or transferred to the United States District Court for the Northern District of California, San Jose Division, where all of the actions now are currently pending."

Some of the lawsuits, such as "Inicom Networks, Inc. v. NVIDIA Corp. and Dell, Inc. and Hewlett Packard," include Dell and HP.