Intel Vs. Nvidia Moves Into A New Phase
Intel Vs. Nvidia Moves Into A New Phase
Graphics chip maker Nvidia (NASDAQ:NVDA) on Tuesday is set to make perhaps its biggest move yet to take the lead in its specialty away from Intel (NASDAQ:INTC) , the world’s No. 1 chipmaker.
Nvidia NVDA is rolling out its first-ever chip set for computers powered by Intel microprocessors, the main chips in a PC.
Intel dominates MPU sales with roughly 80% of the market. It’s also the No. 1 maker of graphics chips, with about 50%, compared with 18% for No. 2 Via Technologies, 16% for No. 3 Nvidia and 10% for No. 4 Advanced Micro Devices (NYSE:AMD) AMD, says Jon Peddie & Associates.
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But with its new GeForce 7 chip set for Intel PCs, Nvidia hopes to grab the top spot.
“The GeForce 7 for Intel is a big deal for Nvidia,” said David Ragones, Nvidia’s GeForce product manager. “There’s a lot of opportunity for us in the Intel space.”
$6 Billion-$8 Billion Market
Chip sets are groups of chips that assist the main processor with various tasks, especially graphics and what are called core logic functions. All computers have chip sets. Most Intel MPU-powered computers use Intel chip sets, and most AMD MPU-powered computers use AMD chip sets, since AMD bought graphics chip maker ATI last year. But computer makers also develop machines that use other chip sets.
Total sales of PC chip sets are $6 billion to $8 billion a year, Nvidia Chief Executive Jen-Hsun Huang estimated last month, in a conference call with analysts to discuss his firm’s most recent financial results.
“So that’s (Intel chip sets) a growth opportunity for us,” Huang said at the time.
Chip set makers sell the product directly to computer makers or makers of motherboards, the main circuit boards inside computers.
Besides chip sets, computer graphics functions can come from separate, add-in graphics circuit boards. And that’s where Nvidia gets much of its sales, though Nvidia does sell chip sets for AMD MPU-powered computers.
Intel doesn’t make graphics add-in boards. Add-in boards can be sold retail to individual users but are usually sold to computer makers, so those companies can configure machines as users want and the market dictates.
“We sell 62% of the chip sets for AMD,” said Nvidia’s Ragones. “We’re the No. 2 supplier of (chip sets) in the world.”
Intel Chief Executive Paul Otellini says his company plans to keep the graphics chip lead. At the annual Intel Developer Forum last week, he touted new products that he says will give Intel an edge in graphics.
But Intel makes its graphics chip sets with a process that he concedes is behind Intel’s leading-edge microprocessors. Not for long.
“We’re changing the cadence starting next year,” he told the forum.
Intel next year will move its chip sets to the 65-nanometer process that is its main process now, an improvement from the 90-nm process that had been cutting edge. The lower number allows more circuitry on chips and thus higher performance.
The move to the 65-nm process, Intel says, will boost its chipset performance by 500%. In 2010, Intel plans to give its chip sets another performance pop by moving them to a 45-nm process.
“At that point 14 time, our integrated graphics performance will be up by a factor of 10 from where we are now,” Otellini said last week.
Analysts say the battle between Intel and Nvidia may be long, and the outcome remains unclear.
Question Of Profit Margin
The new Nvidia chip set “is a single-chip solution and probably less expensive to make (than Intel’s), even though it offers performance advantages,” said American Technology Research analyst Doug Freedman.
Yet Freedman says he doesn’t expect Nvidia will lure many customers away from Intel. “The net gain is probably good for Nvidia, but not huge,” he said. Freedman has a neutral rating on Nvidia’s stock and a buy rating on Intel.
“Nvidia will have to hack its way into this market,” analyst Jon Peddie said. “But Nvidia has two outstanding characteristics. One is superb technology. And No. 2, they are extraordinary marketers.”
Peddie likes the GeForce 7, but says it presents a conundrum for Nvidia, where Ragones says chip set pricing will be aggressive.
Nvidia enjoys a nice profit margin with its add-in board sales, he says, but the chip sets almost surely provide much lower profit margins.
“The question,” he said, “is if Nvidia gets too successful with the chip sets, will it have an impact on their profit margin?”
Source :- CNN Money news