Nvidia's Tegra mobile chip business hits a wall with growth

The market has pretty high hopes for Nvidia's Tegra mobile chip business, but this year is shaping up to be a disappointment.

Chief Executive Jen-Hsun Huang said that while Tegra has been growing "very quickly," the business will be "about flat" this year. That's because Nvidia pushed back the launch of its Tegra 4 chip by a quarter in order to ready its 4G LTE capabilities, he said. The company introduced Tegra 4 at the Consumer Electronics Show in January and then launched its chip that integrates LTE with its app processor,Tegra 4i, a month later.

"The LTE marketplace is growing faster than any transition that has happened in wireless," Huang said during an investor presentation. "It was important for us to engage that marketplace as quickly as possible. ... We decided we'd sacrifice the schedule of Tegra 4 by a quarter so we could pull in Tegra 4i by more than two. ... That was a good decision."

Nvidia traditionally has been known for making graphics processing units found in computers and game consoles, but the company has taken steps to expand its customer base. It has been counting on its Tegra mobile chip to help offset weakness in its core PC market, but so far, it hasn't been enough. Tegra is showing up in many tablets, including the Microsoft Surface RT, but its presence in smartphones is minimal.

Many analysts have been expecting Tegra to show little, if any, growth this year. While Nvidia is blaming the weakness on its chip release schedule, tougher competition likely also plays a role. Qualcomm, the dominant chip provider for smartphones, has been gaining more traction in tablets while Nvidia's smartphone push hasn't been as quick as hoped.

Morgan Stanley analyst Joseph Moore noted yesterday that he expected small growth for Tegra this year, but there's very low visibility and the possibility that Nvidia could lose some of the high-profile design wins of 2012. That notably includes the Microsoft Surface RT and the Google Nexus.

Huang said today that Tegra is the future of Nvidia, and eventually, every chip the company makes will be a Tegra.

"Tegra is an essential future of our company," Huang said. "It is much much more than smartphones. It is everything in computing for us."