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When Google (GOOG) launched the second iteration of the Nexus 7, it went ahead with Qualcomm's (QCOM) processor instead of sticking with Nvidia's (NVDA) Tegra 4. Nvidia lost a few smartphone slots such as HTC as well. In addition, Microsoft's (MSFT) Windows RT, which was based on the Tegra platform, never really took off and Microsoft had to suffer a huge write down of $900 million.

All this led to a huge drop in sales of the Tegra and revenue from that segment dropped by 71% to $52.6 million in the second quarter. This led me to state that investors should sell Nvidia shares.

However, there were many steps that Nvidia took in order to promote the Tegra platform. One such effort was the Nvidia SHIELD, a gaming handheld which won't be enough to turn its fortunes around. But certain recent developments indicate that there might be hope after all.

What next

It seems that Nvidia is trying its hand at making a tablet. To begin with, its tablet will simply be called the Tegra Tab. This will be an in-house product built on the 1.8GHz Tegra 4 processor and paired with 2GB of RAM. It will also probably have a 7-inch 1280x768 display along with what looks like front-facing speakers and dual cameras.

What's interesting is that it also comes with a stylus. This is supposed to be a demonstration of the DirectStylus, the stylus technology that Nvidia has developed.

While it is still not clear what direction this effort will take, but if Nvidia is aiming for gaming tablets, then it could create a separate market for itself, similar to the niche PC gaming market which is growing despite declining PC sales.

Another important slot that Nvidia has won for its Tegra platform is the Xiaomi smartphone. When Xiaomi launched the low end device called "Red Rice," it sold 100,000 units in 90 seconds. Xiaomi's Mi2 smartphone is right behind the Galaxy S4 and HTC One in terms of sales.

Xiaomi made news when it managed to get Hugo Barra, the vice president of Android product management for Google, to join them in order to expand internationally. Currently, Xiaomi is just catering to three or four markets globally.

What's most important is that Xiaomi is already selling more than Apple (AAPL) in China. Just two years after its inception, the company intends to sell 15 million devices this year in China to net $4.5 billion in revenue. MiPhone 3 offers the choice of Tegra or Snapdragon processors. The Qualcomm Snapdragon 800 version is set to debut with China Unicom and China Telecom while the Nvidia Tegra 4 model will launch with China Mobile.

This augurs well for Nvidia's Tegra platform because China Mobile is the world's largest telecom operator.

In addition, Asus stepped out earlier this month with a Tegra 4-powered high end, high resolution tablet -- Asus Transformer Pad TF701T. This is first slate with a 1.9 GHz Tegra 4 processor. It is claimed to be the world's fastest quad-core Cortex-A15 processor with a 72-core GPU.

Microsoft's second iteration of the Surface Pro will also be based on the Tegra platform. However, large scale acceptance of Surface tablets is yet to see the light of the day but Microsoft has no choice but to keep trying till it succeeds as the PC market is in a decline.

Microsoft has sent out invites to the media for an event on Sept. 23, where it would probably be refreshing the Surface tablet. The upcoming Surface 2 is rumored to include a two-stage kickstand, a 1080p display, and Nvidia's Tegra 4 processor, while Microsoft has chosen Intel's Haswell processor for the Surface 2 Pro.

So Tegra 4 is seeing more than just the light of the day now and slowly seems to be gaining slots in devices which might sell in decent numbers.

Beyond mobile computing

PC sales are declining but this doesn't mean that everyone connected with the PC industry is doomed. It's only the players who ply their trade in the broad-based PC market that are feeling the heat. This includes all companies which sell low-end desktops and laptops to end users and will continue to be impacted by the switch to tablets.

However, the PC gaming market is more resilient and companies like Nvidia which primarily cater to that segment need not be concerned much. The PC gaming market is still growing. Nvidia is focusing more on the high-end PC gaming market and in the last reported quarter, GPU revenue increased 8% year-over-year, with strong demand for high-end cards driving growth.

Nvidia wins this one

Qualcomm is Nvidia's biggest threat. As mentioned earlier, Qualcomm's Snapdragon displaced Nvidia from the Nexus tablet. In addition, the fact that it already has a head start in 4G integrated basebands while Nvidia is yet to bring the Tegra 4i to the market will make it more difficult for Nvidia to gain customers.

Qualcomm has also been trying to enter the high-volume market for smartphone processors in China as well. But it looks like this round goes to Nvidia after it made its way into Xiaomi's phone.

Conclusion

If the moves that Nvidia is making to market and promote the Tegra platform are successful, then its mobile computing division should start seeing growth. A lot depends on the sales of the Xiaomi MiPhone 3 as future design wins of Nvidia in the Chinese market and its fight against Qualcomm might depend on it.

Source: Is Nvidia About To Taste Smartphone Success?