Rumor Mill: Nvidia To Exit Chipsets

Nvidia (NVDA) is planning to exit the chipset business, according to DigiTimes. The story is attributed to “sources close to the situation at one of Taiwan’s top motherboard makers.”

Update: But Lehman analyst Tim Luke writes this morning that his checks with Nvidia management in both the U.S. and Taiwan finds that the company remains committed to staying in the chipset business, which is 17%-18% of Nvidia’s revenues.

The DigiTimes story asserted that Nvidia called a meeting earlier this week with its motherboard partners to gauge support for its countinuing to develop chipsets in the future and was met with “silence.” DigiTimes said Nvidia will transfer its chipset team to work on GPU projects. Motherboard makers have canceled high-end motherboard projects based on the nForce 7-series chipset, Digitimes reports.

The story also theorizes that “the loss of its chipset business is expected to have a significant impact on Nvidia’s GPU business in the short-term.”

Update: Luke says that the company “continues to be challenged by significant competitive and pricing pressures in its core GPU business, and that Street estimates “could see further trimming on gross margin and sales pressures.” The company reports its results on August 12.

Luke notes that the chipset business has lower gross margins - around 30% - than the overall gross margin for the company in the 40% range. He notes that the company originally provided chipsets only to AMD (AMD), but has also been supplying chipsets for Intel processors since Q4 2007. Luke says he has been expecting a decline in chipset sales to AMD in the wake of AMD’s acquisition of of Nvidia rival ATI. But he adds that Nvidia is expected to ramp chipsets with Intel motherboard partners such as Hewlett-Packard (HPQ) and Dell (DELL), with incremental opportunities at Apple (AAPL) and others.

Luke notes that there has been speculation that Apple may consider using NVDA chipsets in next-generation Macbooks.

Comments

[locke:]

At these prices, AAPL should just buy NVDA. With NVidia chipsets and GPUs, Apple could finally sell their computers to the most lucrative market: gamers.

2008 Aug 01 09:32 PM

[Urbane Gori...:]

'locke' ... And think of the blazing graphics too... jegan ;-)

2008 Aug 02 03:21 PM

[yohoho:]

nvda isn't closed-source enough for apple

2008 Aug 02 07:56 PM

[XamaX:]

locke, my thought exactly - and why not just buy out the chipset business and integrate it with PA Semi's engineering?

But gaming graphics makes unusual sense too, mainly due to the fact of the gaming platform that the Touch based devices Apple will manufacture are/will be!

2008 Aug 05 01:08 PM

[XamaX:]

Apple doesn't even need to buy them out altogether, just buy them partially for instance 51% stake in cash - that would be 3 billion... I'm sure they would get it quickly back... But I guess it would kill the HP/Dell dealings with NVIDIA or not? Apple selling (chipsets) to HP/Dell? Soon they would also be selling the Apple OS X to be integrated with those selective PC manufacturers, making for a quick MSFT throat cutting kill!

Unfortunately, I believe Jobs is too much of a tight fisted scrooge to let go of 3 billion just like that! He even managed to have ALL the cell carriers advertising and selling for him FOR FREE!!

2008 Aug 05 01:13 PM