Mobile

Nvidia’s future is looking rosy, thanks to mobile chip sales

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Graphics chip maker Nvidia has high hopes for its Tegra mobile processor.

Nvidia’s forecast for its upcoming third-quarter revenue was even more optimistic than Wall Street analyst expectations, thanks to the company’s confidence in its Tegra smartphone processor. The company forecast 4 percent to 6 percent revenue growth for the third quarter this year, putting its forecast revenue somewhere north of $1.06 billion.

Looking at the quarter just completed, Nvidia’s revenue rose 26 percent to $1.02 billion in the second quarter this year, up from $811 million in the second quarter last year. The company flipped from a $175 million loss in the second quarter last year to a $174 million profit in the second quarter this year after reducing its cost of revenue by nearly 28 percent.

This was only the second quarter of sales for its Tegra chip, a graphics processor designed for high-end smartphones like those running Google’s Android mobile operating system. The chip appears in the Samsung Galaxy Tab 10.1, a thin tablet computer that runs Android’s latest tablet-optimized operating system called Honeycomb.

Nvidia chief executive Jen-Hsun Huang said he expects Tegra to continue to perform well for the next two quarters. The company’s Tegra chip appears in the Motorola Photon, a 4G smartphone, and the Droid X2. The Tegra accounts for 10 percent of all Android devices shipped today.

There is a quad-core Tegra mobile processor in the pipeline called the Kal-El that the company plans to ship with high-end smartphones. The Kal-El is more powerful and actually consumes less power than the Tegra 2, Huang said. The company is also working on a unified chipset that includes both a modem and an application processor that will go into lower-end smartphones.

“That part of the marketplace is really not well served by anyone, we are going to build an integrated application processor and modem to address that,” Huang said in today’s earnings call. “That allows us to address the lower end of the smartphone, that part of the marketplace will become quite large over the next few years.”

The company’s mainstream graphics processing wasn’t going anywhere, though. Huang said he expects the company to sell discrete graphics chips for high-end notebooks and workstations for the foreseeable future thanks to high GPU “attach rates” internationally — basically the number of machines that carry a discrete GPU. It’s around 80 percent in China and 70 percent in Europe, but only 20 percent in the U.S.

“I don’t know exactly why, maybe it’s because people have a greater sense of value outside the U.S.,” he said. “I wouldn’t be surprised for our workstation business to continue to grow for many years to come as the world becomes a more design economy.”


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