SANTA CLARA, Calif. – Nvidia is investing heavily in its operations now because it has some “once in a lifetime opportunities” in mobile computing these days, said Jen-Hsun Huang, the chief executive of the world’s biggest standalone graphics chip maker, Thursday in a talk at the company’s investor day.

Huang said that those investments are timely because the “PC business declined more in the last quarter than in the last 20 years. Obviously, the computer industry is changing.”

Nvidia has made PC graphics chips since 1993. It is the only standalone survivor in that business, and it competes against processor giants such as Intel, Advanced Micro Devices (ADM), ARM, and Imagination Technologies (including MIPS).

He said that Nvidia’s Tegra business is at break-even, even as the company ratchets up the investment to more than $300 million a year. Overall, Nvidia research and development has reached $1.2 billion annually. About $880 million of that is core investment in chip design, while $10 million each is focused on new opportunities including Grid systems and the Project Shield handheld gaming system.

“We increased our operating expenses to invest in once in a lifetime opportunities,” Huang said. “These investments are so timely and they must happen now. So our first half is rather muted. We’ll have growth in the second half. The disruption of the traditional market literally happened overnight. That’s why it’s so important for us to keep our foot on the gas.”

This year, Nvidia is investing heavily in the first half in the hopes of achieving growth in the second half, Huang said. He pulled in investments in Tegra 4i, a mobile graphics processor with built-in LTE modem. That investment, he said, “was a good decision by all measures.” That pushed out the debut of Tegra 4 by a quarter, from the first to the second quarter. As a result, Tegra sales will be flat for the year, he said.

Overall, “the exciting thing is the market opportunity ahead of us,” Huang said. The total available market for Tegra chips (with $300 million investment) is $10 billion. The opportunity for Grid computing is $10 billion, and the traditional graphics processing unit (GPU) market opportunity is $6 billion, Huang said. Huang said he thinks the computing business, if not PCs, will continue to grow.

Huang said that GPUs are Nvidia’s “crown jewels,” generating billions of dollars in revenues on the PC thanks to PC gamers and other enthusiasts. Nvidia is in the process of “mobilizing” those crown jewels in products such as Tegra. About three billion devices with graphics chips will be shipping by 2015, at a 12 percent compound annual growth rate. Nvidia is gunning for a sizable share of that.

Huang mentioned that Nvidia has more than 5,000 patents, mostly related to computer graphics. Nvidia is investing in games, enterprise, and computing devices.

With Grid computing, Nvidia is taking that business into the cloud, enabling remote graphics processing and it will lead to multiple users on a single graphics chip.  But Huang said the competition was fierce.

“The opportunities are enormous, but so are the threats,” he said. “Some day, every single processor we make will be a Tegra. But this is not about us growing into mobile devices only. This is about inventing the future of computing.”

At the close of the talk, Huang said that Nvidia will return $1 billion this fiscal year to shareholders in the form of stock buybacks and dividend payments, including $100 million in stock being repurchased this quarter. This will bring to $1.2 billion the total capital returned to shareholders since the company announced its quarterly dividend program in November.

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July 9-10, 2013
San Francisco, CA

Early Bird Tickets on Sale

Mounting its biggest challenge to market leader Qualcomm, Nvidia is introducing its first mobile processor with integrated wireless data technology. The company says the result will be smartphones with killer processing power and 3D graphics.

The new Tegra 4i has the highest performance of any single-chip smartphone processor, according to Santa Clara, Calif.-based Nvidia. The chip represents the maker’s big chance to grab market share in smartphones as it shifts from its mainstay business of developing graphics chips for personal computers to creating chips for mobile devices.

Nvidia is announcing the chip ahead of the Mobile World Congress event in Barcelona, where the Tegra 4i will be on display. It will also have sample smartphone designs to make it easier for customers to adopt it. As you can see from the above picture, the Tegra 4i is smaller than the Tegra 4 chip for tablets and superphones.

But the competition is tough. Qualcomm is introducing its 600 and 800 series Snapdragon processors in the coming months, and it has lots of design wins. Those processors have high-end 3D graphics and high-speed LTE data networking that can deliver 150-megabits-a-second data access (once such networks emerge).

Still, Nvidia says its chip is half the size of its competitor’s, which means it will likely be cheaper and consume less power, resulting in longer battery life. Nvidia claims that the Tegra 4i can generate performance per square millimeter that is 2.5 times better than the Snapdragon 800 series chip. The 4i’s raw performance is also faster, and it delivers blazing fast Web browsing, Nvidia said.

Nvidia’s chip is sampling now, and a few phones could feature it later this year. But more smartphones with the chip should debut in the spring of 2014. Qualcomm, by contrast, said devices with its 800 series chip could appear mid-year.

“The Nvidia Tegra 4i looks competitive on a performance-per-mm2 basis, but until we see third-party tests between Qualcomm’s Snapdragon and Nvidia’s Tegra 4i, no one knows for certain,” said Patrick Moorhead, president of analyst firm Moor Insights & Strategy. “Qualcomm did provide enough performance details at CES where one could derive a reasonable competitive estimate. If the Tegra 4i performance estimates do stand, then Nvidia could be very competitive, particularly in China and southeast Asia, where performance at a cost level means a lot.”

Moorhead added, “Nvidia’s biggest differentiator with the 4i is its integrated and software-upgradable LTE modem combined with its graphics brand.  This could be the first significant threat to Qualcomm in that it’s the first time a high performance system-on-a-chip with integrated LTE is available from someone other than Qualcomm.”

The Tegra 4i, previously code-named Project Grey, has 60 custom graphics cores for 3D graphics and four heavy-duty microprocessor cores to handle computing tasks. It also has a version of Nvidia’s i500 LTE modem, optimized for integration with the processor. The modem can deliver up to 150 megabits per second LTE data service.

The processor uses ARM’s newest and most power-efficient core, the 2.3-gigahertz R4 Cortex-A9 central processing unit. Nvidia also added a fifth lightweight core to handle small tasks while saving on battery life.

Nvidia says the design enables an “extremely power-efficient, compact, high-performance mobile processor that enables smartphone performance and capability previously available only in expensive superphones.”

Phil Carmack, senior vice president of the mobile business at Nvidia, said, “Nvidia is delivering for the first time a single, integrated processor that powers all the major functions of a smartphone. Tegra 4i phones will provide amazing computing power, world-class phone capabilities, and exceptionally long battery life.”

ARM and Nvidia jointly designed the new CPU, basing it on the ARM Cortex-9 processor. Tom Cronk, executive vice president at ARM, said the project focused on driving performance, efficiency, and improvements in streaming and responsiveness.

The Tegra 4i has lesser graphics capabilities than the 72-graphics-core Tegra 4 introduced in January for tablet computers and Nvidia’s Project Shield mobile gaming device. But it’s still a powerhouse, with more than five times the number of graphics cores as last year’s Tegra 3 processor.

Nvidia says the graphics processing can deliver “high-quality, console-quality gaming experiences and full 1080p high-definition displays.”

The LTE modem is an optimized version of Nvidia’s i500 software-defined radio chip, with LTE and network-upgrade technology. The 4i mobile processor’s camera includes the Computational Photography Architecture first seen in the Tegra 4. The advanced features include high-dynamic range, where the camera can take a good picture even it contains bright and shadowy parts.

The camera also has tap-to-track functions and panoramic photos with high-dynamic range.

To spur adoption, Nvidia introduced its Phoenix reference smartphone platform — a design that phone makers can use as a model for their own smartphones. The platform’s purpose is to help customers get to the market quicker.