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Nvidia Struggles To Keep Up with GPU Chip Demand

Nvidia Struggles To Keep Up with GPU Chip Demand
By Mark Long

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Demand for Nvidia's new GPUs, based on Kepler architecture, for desktop PCs was so strong in the first quarter that it exceeded Nvidia's supply. Moreover, NVidia's Kepler-based GeForce 600M offerings for notebooks racked up record revenue on the ramp up of the Intel Ivy Bridge platform. The Tegra 3 processors also drove profits.

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Nvidia reported robust first-quarter results on Friday -- driven by high demand for products based on the company's graphics processor unit offerings as well as strong sales of quad-core Tegra 3 chipsets for smartphones and tablets.

The big downside for Nvidia, which relies on overseas semiconductor plants to manufacture its products, is that its Taiwan-based partner Taiwan Semiconductor Manufacturing Co. is struggling to keep up with demand for new chips designed for production using TSMC's advanced 28-nanometer process technology.

"Supply is still constrained, and our manufacturers are working their hearts out to catch up to our demand," said Nvidia CEO Jen-Hsun Huang.

"But at the moment, demand still continues to exceed supply and we expect that to happen for throughout the year, Huang told investors on a conference call Friday. "Every chip that can come out of their fab is being shipped instantaneously."

Nvidia reported a profit for the quarter of $60.4 million, or 10 cents a share, compared with a year-earlier profit of $135.2 million, or 22 cents a share.

Strong Mobile-Chip Growth

Demand for Nvidia's new GPUs, based on Kepler architecture, for desktop PCs was so strong in the first quarter that it exceeded the company's supply. Moreover, NVidia's Kepler-based GeForce 600M offerings for notebooks racked up record revenue in the quarter on the strength of the ramp of the Intel Ivy Bridge platform.

Meanwhile, Nvidia's Kepler offerings are continuing to evolve. Two weeks ago, for example, the company unveiled a new computer graphics card powered by dual GeForce GTX 690 GPUs based on the company's Kepler architecture, which has been engineered to establish a new performance threshold for the gaming experience.

Revenue from the company's consumer products business -- which includes Tegra chipsets for smartphones and media tablets -- rose 20.8 percent from the prior quarter, to $132.6 million.

"The increase was largely attributable to our Tegra-based business, [driven by] the production ramp of devices based on our Tegra 3 processors for smartphones and tablets," Nvidia interim CFO Karen Burns said.

Earlier this year, Nvidia's 1.5-GHz quad-core Tegra 3 processor took the Mobile World Congress in Barcelona by storm, showing up in a swath of new smartphones running the latest version of Android, high-end cameras, an HD screen, and Nvidia's latest chipset -- including the LG's new Optimus 4X HD.

Nvidia's quad-core chipset is broadly similar to the chipset in Sony's PlayStation Vita handheld gaming system, given that both are based on a quad-core processor from ARM. \

"Tegra 3 phones are now shipping from 22 carriers in Europe and Asia, and more will follow shortly," the head of Nvidia investor relations, Christopher Evenden told analysts Friday.

Pushing the Envelope

At the same time that TSMC is struggling to keep up with demand, the semiconductor maker is also pushing the boundaries of its 28nm products for high-performance mobile applications. Earlier this month, TSMC unveiled a test chip that demonstrated what will eventually land in a range of computing products extending from high-frequency, performance-oriented computing devices to power-sensitive mobile applications.

"At 3.1 GHz, this 28[-nm] dual-core processor implementation is twice as fast as its counterpart at TSMC 40nm under the same operating conditions," said TSMC Vice President Cliff Hou.

Meanwhile, designers at Nvidia are also looking to push the GPU design envelope by designing next-generation chipsets that fully harness the power of cloud computing environments.

"Graphics is more important than ever," Huang said. "Look for exciting news next week at the GPU Technology Conference [in San Jose, Calif.] as we reveal new ways that the GPU will enhance mobile and cloud computing."

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