Nvidia: The PC is Being Eaten by Tablets

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NVIDIAby Andy Patrizio

The third-quarter earnings calls for many tech firms have been pretty dismal, but Nvidia bucked the trend with record third-quarter revenue of $1.2 billion this year and growth across its product lines.

The GPU maker, already dominant in the discrete graphics market, is gaining share as its chief competitor, AMD, continues to die on the vine. But more important, Nvidia is finally gaining traction and sales for its Tegra line of ARM-based chips for mobile devices

It seemed like CEO Jen-Hsun Huang was talking forever about design wins, but the sales weren’t there. This time, he’s got the sales. Approximately 30% of the company’s income is now derived from the provision of “non-PC” chips, which are primarily Tegra processors.

Introduced in 2008, Tegra is a system-on-chip (SoC) that combines an ARM CPU, Nvidia GPU and other various controllers all in one piece of silicon. The Tegra 3 can be found in HTC’s One X, Google’s Nexus 7, Asus Transformer, Lenovo IdeaPad Yoga and Microsoft Surface tablets.

“Overall, our tablets are up 100% year-over-year. Our Tegra processors overall is up about 50% year-over-year. And so that gives you a sense that the vast majority of the Tegra growth has come from tablets, and Super Phones has been relatively stable,” said Huang on an earnings call with analysts.

Huang said that Tegra is “a small business.” He expects an opportunity to grow well over 50% each year, and there will be newer products as well. The next generation of Tegra, known as Project Denver, is in the works, and the company plans to introduce its own 4G-integrated modem processors, which would put it in competition with companies like Broadcom and Intel’s Infineon division.

In Huang’s view, the total addressable market (TAM) for PCs is “being eaten by tablets. And the reason for that is because a great tablet is surely better than a cheap PC. And these days, the tablets are so versatile.”

Dean McCarron, president of Mercury Research, said have had an impact at the very bottom of the PC market, in particular netbooks, and may have had impacts on growth rates of PCs and Nvidia is positioned to win either way. If people buy a tablet instead of a low-end laptop, they get a Tegra chip. If they buy a high end PC, it will likely have a GeForce GPU in it.

After years of talk, he said Tegra is significantly up. “This was the breakthrough quarter for them because they had Surface and the Nexus 7. I know that Asus came out and said that Nexus 7 volumes were ramping to the one million units a month phase,” he said.

But McCarron disagrees with Huang’s assessment of the market. “We’re not seeing drop off in sales. They have AMD as a competitor and are gaining share from AMD. So if there were any weakness it’s being masked by that. Overall in the PC space, growth is anemic, but it doesn’t have anything to do with tablets. It has more to do with the economy,” he said.



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