The Santa Clara, Calif., company, traditionally known for making graphics processing units found in computers and game consoles, has been counting on its Tegra mobile chip to help offset weakness in its core PC market. So far, it hasn't been enough. Nvidia is showing up in many tablets, but its presence in smartphones is minimal. In addition, the bulk of Tegra sales are for a couple of tablets, the Google
Nvidia plans to launch a new chip next year to better address smartphones, but until that happens, the company is likely to be dogged with worries about its mobile push. The industry has already claimed some victims, like Texas Instruments, which recently said it would refocus its applications processor business away from smartphones and tablets. Nvidia has a lot of work to do to make sure it doesn't end up in the same situation.
Their core markets weren't providing significant enough growth...and they felt like they had the skills they could deploy for mobile. But when you look at the handset side of the business, it has proved more challenging than they expected. They've been successful on the tablet side, but the question is, can non-Apple tablets continue to make inroads and can Nvidia capture enough market share. --RBC Capital Markets analyst Doug Freedman
Here's a look at the challenges and opportunities facing Nvidia:
Yes, this is a really strong area for Nvidia right now, with CEO Jen-Hsun Huang noting during last night's earnings conference call that the . "The vast majority of the Tegra growth has come from tablets," he said.
However, the tablet market is much smaller than the smartphone industry, and tablets in general aren't selling very well against the
Meanwhile, Nvidia's chips have been used in more tablets lately, but the bulk of its sales come from only a couple devices: the Google Nexus 7 and the Microsoft Surface.
The Nexus, with its sub-$300 selling price, has been wildly popular. However, that could change now that the iPad Mini has hit the market. Analysts expect Apple's new device to.
And Microsoft's Surface also appears to be selling well, but it's too early to tell whether it will be a success. Also, the next planned version of the device, the
There are big opportunities for Nvidia with other Windows RT devices, but Microsoft still tightly controls design plans for those products. And it's not really clear how well those devices will do, especially since they're not only competing against each other but also against Surface.
"A crowded tablet market simply isn't good for Tegra, and it's fair to assume the iPad Mini will change the original trajectory of Nexus 7," Evercore analyst Patrick Wang said. "It's also early days on Surface, but it lacks follow-through."
That brings us to smartphones. For many chip companies, the phone market basically is the promised land. Demand for smartphones seems to be on a never-ending climb while other areas, like PCs, flounder.
For Nvidia, smartphones have proved particularly elusive. Aside from a few phones such as the HTC
Qualcomm offers a standalone application processor (similar to Tegra), but importantly, it provides chips that integrate wireless capabilities, such as LTE, with the applications processor on a single piece of silicon. Integrated chips typically are cheaper than buying separate processors for the functions, and that means Qualcomm can easily address low-end devices as well as those at the top end of the market.
Nvidia expects to ship about 30 million Tegra chips this year, while Qualcomm shipped 141 million chipsets in its recently ended fiscal fourth quarter alone. For the full year ended September 30, Qualcomm sold 590 million processors.
Nvidia bought a company, Icera, to give it wireless-chip technology, but it hasn't yet released an integrated chip. Nvidia says it's in the process of developing that product, and Huang told CNET yesterday that it will likely show up in devices in about a year.
Until that happens, Qualcomm will probably keep controlling the market, and Nvidia's smartphone business likely won't grow much from its current size. Huang noted yesterday that while Nvidia's tablet business doubled from the previous year, the "superphone business," aka high-end phones, largely was "stable."
For growth, the "key will be Tegra 3 penetration into less-expensive smartphones," Morgan Stanley analyst Joseph Moore noted.
Handset vendors making their own chips
Meanwhile, the two biggest phone and tablet makers -- Apple and Samsung -- design their own chips that serve as the brains of their devices. That's not only a threat to Nvidia but could hurt all the other traditional processor makers targeting the area as well.
Right now Apple and Samsung use the chips in their own products, but as one analyst noted during Nvidia's earnings call, Samsung may soon make a bigger push to sell its application processor for use in other companies' devices. Some handset and tablet makers may be hesitant about using a competitor's products, but Samsung already supplies many important components.
Huang last night acknowledged that Samsung is a "formidable company," but Nvidia will simply have to "continue to stay ahead of them technologically."
Still, Samsung is another competitor for Nvidia and other mobile-chip makers to deal with in an already-crowded market. Of all the companies targeting the market -- including Intel, Texas Instruments, Freescale, Marvell, STMicro, and Broadcom -- only Qualcomm is.
"Apple makes its own stuff, Samsung makes a lot of its own stuff, and Qualcomm is an 800-pound gorilla. Then there's Intel's Infineon business, Broadcom, Marvell, Spreadtrum, and MediaTek taking mostly everything else," MKM Partners analyst Daniel Berenbaum said. "You have to ask yourself, how is the market big enough for this many players?"
In the end, Nvidia continues to do all it can to broaden its mobile business. It recognizes it needs to be strong in the smartphone and tablet area as the PC industry changes. Time will tell if Nvidia's steps will be enough.
Apple - USE TAG
reading•Nvidia still has a lot to prove in the mobile market
Dec 18•Tips for improving battery life on your MacBook
Dec 18•iPhone XR vs. iPhone 8 Plus: What iPhone should you buy?
Dec 18•This iPhone XR, XS app lets you blur the background and foreground in portrait mode photos
Dec 18•Thinking of gifting an Amazon Echo or Google Home? Read this first