Marking a dramatic shift in business strategy, Nvidia announced today that it will begin licensing current and future GPU and modem technology to other silicon vendors. This includes the current Kepler GPU product family, as well as the modem technology acquired from Icera. Admittedly, this opens up Nivida to competition for the company’s Tegra family of processors from silicon vendors using Nvidia technology. However, it will create opportunities for other silicon vendors to use the technology in targeting other markets and applications not targeted with Tegra.
With the addition of Nvidia licensing GPU technology there are now five major GPU IP licensors, including ARM, DMP, Imagination, and Vivante. However, two of those companies also offer CPU cores--ARM and Imagination with the recent acquisition of MIPS. Theoretically, developing both the CPU and GPU technology should provide and edge for ARM and MIPS, but in the case of GPUs, Nvidia has the advantage of developing some of the most advanced graphics technology that power high performance PCs and workstations. It would stand to reason that AMD, the other major PC and workstation GPU vendor, might also benefit from a similar IP licensing model, which it once did before selling the GPU IP group to Qualcomm, which now refers to the product family as Adreno.
So, the real question is why is Nvidia making the change in the company’s business model when its major competitor did the opposite and it may create more competition for the company’s other products? The official statement from Nvidia is to address changes in the market, which include vertical integration and the proliferation of computing technology into other markets and applications, such as embedded and new applications referred to as the internet of things. One likely factor not mentioned is that lack of volume sales of Tegra. Nvidia has raised the competitive bar with both the introduction of Tegra and the move to an annual cadence of new products.
But unfortunately, Tegra has suffered from being a step behind companies like Qualcomm and MediaTek in integrating Wi-Fi and cellular modem technology, which is becoming a critical competitive factor in the mobile segment. In addition, Tegra has not secured the high-volume design wins because of the dominance of a few vendors that produce their own silicon solutions, mainly Apple and Samsung. The outlook does not look much brighter because other emerging OEMs like Huawei and ZTE are developing their own processing solutions in-house or through subsidiaries. In fact, the success of the Apple model has led most mobile OEMs to consider the vertically integrated business model. The market dynamics have also led several semiconductor companies to abandon the mobile segment, including Freescale, TI, and ST-Ericsson.
If you add the rather bleak to modest outlook for the traditional PC market, it is clear that any change in business model that may increase revenues will be welcomed at Nvidia. The change is a better alternative than abandoning future development and the mobile market altogether. The shift by Nvidia also demonstrates the challenges that all high-tech companies face in adapting to a rapidly changing business environment that requires innovation not only in technology, but also in business models.
Jim McGregor is founder and principal analyst at Tirias Research.