Tough times ahead for Nvidia? Part one
24th Mar 2009 | 17:06
Why Nvidia could be battling for its very survival
The PC graphics business
Is graphics specialist Nvidia in mortal danger? That's a question we've been increasingly pondering in recent months.
The case for the prosecution goes something like this. Pretty much every part of Nvidia's business is either under immense pressure or at risk of evaporating altogether. Take the company's PC chipsets. With Core i7 Intel has started to shift towards producing processors with more and more features integrated into the CPU itself.
Later this year, Intel will wheel out its first processor with on-package graphics. At which point, any third party chipset with integrated graphics - such as Nvidia's GeForce 9400 - will seem rather redundant. Poof goes a large slice of Nvidia's chipset business in both desktops and laptops.
Of course, AMD has similar plans to bring integrated graphics cores into its CPU dies, so even that small slice of the market looks like toast. It's also notable that Nvidia chose not to produce a chipset supporting the Core i7 in favour of waiting for the mainstream Core i5 to appear. The process of market shrink has already started.
Much the same problem applies to Nvidia's new Ion ultra-mobile platform for the Intel Atom processor. Undoubtedly, it's an extremely attractive looking platform compared to Intel's rather pathetic Atom chipsets.
Problem is, the next iteration of Atom, known as Moorestown, is due out later this year. Moorestown is pretty much a system-on-a-chip design, doing away with the need for a supporting chipsets. It very much looks like the rug will be pulled from beneath Ion just as it begins to establish itself on the market.
The PC graphics business
Meanwhile, Nvidia's meat-and-potatoes PC graphics business has been having a pretty torrid time of late. Part of the problem is the surprising return to form of AMD with the ATI Radeon HD 4000 series of graphics chips. These are some of the most effective and efficient GPUs of recent memory. They're also extremely compact and therefore cheap to produce. The upshot of which is that margins and profitability on Nvidia's bigger, more costly chips are being squished.
Nvidia has also been suffering production quality problems involving the packaging materials used with many of its graphics chips. It's hard to know exactly how bad the problem is, but the company has reportedly recently admitted to spending over $40 million trying to patch things up.
At the same time, some analysts suggest that the broader market trend is towards a polarisation of the PC graphics market in favour of integrated at one end and performance graphics at the other, with relatively little volume in the middle. With Intel's new CPU strategy increasingly cutting it out of integrated graphics, that leaves Nvidia fighting for scraps at the performance end of the market.
Larrabee and consoles
The Larrabee threat
Making matters even worse, Intel is just about to launch its own performance graphics chip, codenamed Larrabee. Say what you want about Larrabee's unconventional X86-based architecture, but thanks to Intel's sheer clout, it's bound to win some market share at the expense of incumbents AMD and Nvidia. And even if the first Larrabee chips are clunkers, in the long run you'd be bloody brave to bet against Intel eventually getting it right.
But what of Tegra, Nvidia's mobile phone wonderchip? It's certainly impressive on paper, packing massively more graphics horsepower than any other platform for smartphones. However, despite being unveiled a year ago, Nvidia has only been able to announce a small handful of design wins with lesser-known Taiwanese device makers. The big beasts in the mobile jungle are nowhere to be seen in Nvidia's marketing materials.
Finally, there is the minor matter of gaming consoles. Here the evidence is rather more tendentious. And yet somehow a consensus has emerged that says Nvidia's bombastic behaviour has burned bridges with both Microsoft and Sony. If the general internet scuttlebutt is to be believed, there's virtually zero chance of Nvidia technology appearing in the next Xbox or PlayStation consoles. Meanwhile, Nintendo is carving out a new niche in accessible gaming which places much less emphasis on graphics grunt. In that context, it seems unlikely that Nintendo would feel the need to ditch its long term graphics supplier, AMD.
So, assuming a devil's advocate posture, let's recap. Nvidia's desktop and laptop chipset businesses are being pinched, Ion looks like a dead duck even as it's being launched, Nvidia's core PC graphics business is in the trenches, Tegra is a virtual non-starter and its console cash flow will die with the underperforming PlayStation 3. In a word, ugly.
All of which paints a rather gloomy picture for Nvidia. But is it fair? Things are often not what they seem in the computer chip industry. Lest you have forgotten, 12 months ago AMD looked utterly dead in the water. Today it has arguably the best graphics chips in the world and a much more competitive CPU product in the Phenom II.
Where better, then, to get the case for the defence than Nvidia itself in the shape of Derek Perez, the company's long serving Director of PR? If Perez can't spin Nvidia's current situation into a tale of impending glory, nobody can. To find out if he can pull it off, tune in to part two on TechRadar tomorrow...
Like this article? Then check out Part 2: The case for the defence
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