Last week Nvidia (NVDA) introduced Xiaomi Mi3, the first phone based on its Tegra 4 processor. The device will launch in October this year and will be powered by Nvidia’s Tegra 4 processor as well as Qualcomm’s (QCOM) Snapdragon 800 processor. While the Tegra 4 phone will launch on China Mobile, the world’s largest carrier, the one featuring the Snapdragon chip will be available for users on China Unicom and China Telecom. Xiaomi Mi3 will be available in the mainstream price point of $300-$400 and will be sold only in China.
Xiaomi is one of China’s most innovative mobile device companies and its last handset was the top selling smartphone in China, selling 100,000 units in 90 seconds. Claimed to be the world’s fastest mobile processor, Tegra 4 offers record levels of performance and battery life with its 72-core GeForce GPU, quad-core ARM Cortex-A15 and fifth battery-saver CPU core. Xiaomi founder and CEO, Lei Jun believes that the Tegra 4 processor provides performance and features never seen before in a smartphone.
In addition to Xiaomi, Nvidia has also received Tegra 4 orders for Microsoft’s second-generation Surface RT as well as Asustek, Toshiba and HP tablets. In addition, Nvidia is apparently working on its own brand media tablet called Tegra Note. Though the company denies the existence of the device, images of the gadget have been published by various websites, including China DIY.
Nvidia's Tegra Revenue to Decline in 2013
Having seen its Tegra processor revenue climb by approximately 200% and 30% in 2011 and 2012 respectively, Nvidia anticipates the same to decline by $200-$300 million this year. Much of the decline can be attributed to the ramp down of Tegra 3 products and the company’s conscious decision to delay the launch of Tegra 4 by one quarter in order, to pull up the production of Tegra 4i chips.
Despite the success of its Tegra 2 and Tegra 3 processors, Nvidia had so far been unable to score a high-profile design win that could accelerate its progress in the mobile computing domain. However, with Tegra 4 devices and Tegra 4i certification under way (expected in Q3), we expect growth in Tegra shipments to accelerate in the second half of 2013.
Tegra Processors Remain a Long-Term Growth Driver
Leveraging its Tegra processors to tap growth in mobile computing is a key long-term growth strategy for Nvidia. Though its decision to delay the launch of Tegra 4 processors will impact its short-term growth, we believe that the decision to focus on the production of Tegra 4i chips can accelerate its long-term prospects in the mobile market. Tegra 4i is Nvidia’s first fully integrated 4G LTE mobile processor. 4G/LTE is the future of wireless connectivity for mobile devices, especially smartphones. Of the various technologies that are driving the market currently, LTE is seeing the strongest growth as carriers around the world increasingly shift to the new standard for wireless communication.
Additionally, Nvidia recently announced its next generation Tegra mobile processor, code-named Logan, based on the Kepler architecture. The company promises that the new mobile graphics processor will be more powerful than the PS3. Mobile devices using Nvidia’s new chip are expected to start shipping by mid-2014. We expect Tegra to be an important revenue stream for Nvidia in the future. With Tegra 4, the company aims to expand its reach to other large markets where visual computing matters such as auto navigation systems, TV set-top boxes and new desktop foreign factors like all-in-one and smart monitors.
Disclosure: No positions.