Last week, Xiaomi, China's biggest electronics company, introduced its first tablet MiPad based on Nvidia's (NASDAQ:NVDA) Tegra K1 mobile processor. The Xiaomi MiPad will be available in China starting in June as an open beta, and select customers will get the option to go hands-on with pre-production units. The 16 GB variant will cost $240, while the 64 GB version will be available for $270.
What is Tegra K1?
Introduced at the 2014 Consumer Electronics Show, Tegra K1 mobile processor is a 192-core super chip that brings the Kepler architecture, which is the world's fastest and most energy-efficient GPU architecture, to the mobile platform. Nvidia claims that using the Kepler GPU enables the new mobile processor to be 1.5 times more efficient than other mobile GPUs and offers better graphics than the Xbox 360 and PlayStation 3.
Nvidia believes that Tegra K1 will help the company set new mobile standards by supporting the latest PC-class gaming technologies on the mobile platform. Tegra K1 offers real-time computing, global illumination, higher dynamic range and greater detail, including reflective surfaces, dripping water and other realistic physically-based rendering. Nvidia expects the performance and feature gap difference between mobile and PC high-end gaming to blur in the future.
How Does The Collaboration With Xiaomi benefit Nvidia?
Xiaomi was the first company to launch the world's first smartphone based on Nvidia's Tegra 4 processor. The company sold 100,000 units in under 90 seconds in October 2013.  China is the largest smartphone market, and Xiaomi is the third largest smartphone vendor in the country (10% market share) after Samsung (OTC:SSNLF) (18% market share) and Lenovo. In comparison, Apple (NASDAQ:AAPL) accounts for 9% of the Chinese smartphone market.  Xiaomi shipped 11 million smartphones units in Q1 2014, up from 7 million in the previous quarter. 
While the Chinese smartphone market has been growing for a long time, the tablet market in the region hasn't quite taken off yet. Apple leads the tablet market with its market share touching 30%. MiPad is Xiaomi's first tablet and going by its track record in smartphones, the company can manage to gain a significant share in the tablet market. We think Nvidia will benefit from Xiaomi's dominance in the Chinese smartphone market as well as its potential growth in the tablet market.
We believe that Nvidia's Tegra processors revenue will cross $1 billion over our review period. In addition to tablets and smartphones, the company aims to expand its reach to other large markets where visual computing matters such as auto navigation systems, TV set-top boxes, the Android gaming market and new desktop foreign factors like all-in-one and smart monitors. (Read: Mobile Device, Automotive and Gaming Are Key Growth Drivers For Nvidia's Tegra Processors)
Our price estimate of $18.43 for Nvidia is almost in line with the current price estimate.
Disclosure: No positions.