Monday, May 30, 2011

As PC Markets Slow, Nvidia Aims at Tablets

Jen-Hsun Huang has rallied his engineers and developers before around his grand plans for Nvidia, the computer chipmaker he helped found nearly 20 years ago.

Mr. Huang — a Taiwanese immigrant, onetime table tennis champ and Stanford-educated electrical engineer — took a gamble in 2006 on a graphics chip that would give his company the lead in the most sophisticated computing power used in moviemaking and science. And in 2003, he energized Nvidia after it lost a lucrative deal for supplying a graphics chip to the Microsoft Xbox game machine.

Now he wants the company to make another shift, stretching beyond graphics to build the chips that power smartphones and tablets.

“We used to be a PC graphics company — only PCs, only graphics,” Mr. Huang said in an interview last week. “We have reinvented Nvidia.”

It is an opportune time for the shift. Tablets are poised to surge, as PC sales are slowing. Meanwhile, the technology in PCs is changing, threatening the company’s old market. Intel and Advanced Micro Devices both sell main processors that include graphics abilities, cutting out the need for add-on graphics processors, and already eating into some Nvidia sales.

“We are well positioned to go after a market opportunity that is sixfold the market opportunity of the Nvidia you knew from the past,” Mr. Huang recently told analysts.

Behind Mr. Huang’s showmanship and bold plans is the Tegra 2, the company’s latest mobile chip. This chip, based on the power-efficient chip architecture from ARM Holdings, has started to appear in a number of smartphones, like the Droid X2, and in tablets like the Samsung Galaxy Tab 10.1 that run on Google’s Android operating system. Mr. Huang envisions Nvidia becoming as essential to Android as Intel has long been to Windows PCs.

Although few people in the chip industry dismiss Mr. Huang’s ideas, the path will be difficult. “There’s a lot of uncertainty about how they are going to outgrow their core graphics business,” said Rajvindra Gill, an analyst with Needham & Company, which recently downgraded Nvidia’s stock to hold from buy.

Still, the shift appears to be a necessary step.

A recent report from Jon Peddie Research shows that Nvidia’s share of the market for graphics processing — including integrated and stand-alone chips — dropped eight percentage points year over year in the first quarter to 20 percent, while A.M.D.’s share of the graphics chip market rose three percentage points and Intel’s rose almost five percentage points

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