Nvidia thinks Android is disrupting PC maket

Nvidia managed to beat the street once again, but CEO Jen-Hsun Huang sees some rough seas ahead.

During Nvidia’s first-quarter earnings call, Huang said the company’s upcoming fourth generation Tegra chips will start shipping in the second quarter, but production of Tegra 4-based devices will ramp up in the third and fourth quarters. Tegra 4 was delayed by several months and although we should see the first design win announcements in a matter of weeks, availability still remains a concern. The Tegra 4i, a smaller SoC with previous generation CPU cores and LTE support, has been brought forward by a few months, Huang said. However, Tegra 4i phones aren’t coming this year. They are expected to ship in Q1 2014.

“This time around, although we have fewer phones, fewer high profile phones, there more Android devices being built around the world than you could imagine.” said Huang. “We have tablets, obviously in development. We have other types of computing devices that we will also announced probably starting in the second quarter and ramping strongly in Q3 and Q4.” 

Although Huang reiterated Nvidia’s commitment to the mobile market, he also pointed out that Android and tablets in general are disrupting the PC market. Huang argued that consumers who already have Android phones are likely to pick up Android tablets as well. He added that a great tablet is better than a cheap PC and that they are disrupting the entry-level PC market. In other words, while Nvidia stands to cash in on Tegra 4 tablets and Tegra 4i phones, it will lose out to cheap tablets in the PC market. 

However, Nvidia doesn’t appear too concerned and this is why. Intel’s upcoming Haswell chips, along with AMD Richland and Kabini APUs, feature relatively powerful integrated graphics, hence the need for discrete graphics in the low-end is evaporating fast. In spite of this, Nvidia hopes to grow its market share on Haswell based systems. It is counting on enthusiasts who are willing to pay a premium for more GPU performance. Although Intel integrated graphics are getting better, Nvidia is convinced that its low-end offerings will still offer superior performance and compelling value. If AMD were to grow its CPU share in the notebook market, Huang believes Nvidia could take a hit, but this doesn’t seem very likely. 

Although the PC market declined by double digits quarter-on-quarter, Rob Csongor, NVidia VP of Investor Relations, pointed out that Nvidia declined only six percent. 

“That difference comes from growth in the non-commodity PC space of course and wherever that growth is that’s non-commodity PC space will tend to be Tesla, Quadro and GTX,” he said. “That’s also we are putting most of our energy. Most of our energy related to GPGPU, related to extending our GPU beyond the PC into our data centers and servers.”

In other words, GPGPU and Tegra are helping Nvidia diversify and weather the storm in the PC market. The approach seems to be working, although the company is about to face a bit more competition on the mobile front from Intel’s Silvermont Atoms, especially in the tablet market.