NVIDIA 2011 Annual Report Download - page 14

Additionally, there can be no assurance that the industry will continue to demand new products with improved standards, features or performance. If
our customers, original equipment manufacturers, or OEMs, original design manufacturers, or ODMs, add-in-card and motherboard manufacturers, system
builders and consumer electronics companies, do not continue to design products that require more advanced or efficient processors and/or the market does
not continue to demand new products with increased performance, features, functionality or standards, sales of our products could decline and the markets for
our products could shrink. Decreased sales of our products for these markets could negatively impact our revenue and our financial results.
We believe achieving design wins, which entails having our existing and future products chosen for hardware components or subassemblies designed
by OEMs, or ODMs, add-in board and motherboard manufacturers is an integral part of our future success. Our OEM, ODM, and add-in board and
motherboard manufacturers’ customers typically introduce new system configurations as often as twice per year, typically based on spring and fall design
cycles or in connection with trade shows. Accordingly, when our customers are making their design decisions, our existing products must have competitive
performance levels or we must timely introduce new products in order to be included in our customers’ new system configurations. This requires that we:
• anticipate the features and functionality that customers and consumers will demand;
• incorporate those features and functionalities into products that meet the exacting design requirements of our customers;
• price our products competitively; and
• introduce products to the market within our customers’ limited design cycles
If OEMs, ODMs, and add-in board and motherboard manufacturers do not include our products in their systems, they will typically not use our
products in their systems until at least the next design configuration. Therefore, we endeavor to develop close relationships with our OEMs and ODMs, in an
attempt to better anticipate and address customer needs in new products so that we will achieve design wins.
Our ability to achieve design wins also depends in part on our ability to identify and be compliant with evolving industry standards. Unanticipated
changes in industry standards could render our products incompatible with products developed by major hardware manufacturers and software developers. If
our products are not in compliance with prevailing industry standards, we may not be designed into our customers’ product designs. However, to be
compliant with changes to industry standards, we may have to invest significant time and resources to redesign our products which could negatively impact
our gross margin or operating results. If we are unable to achieve new design wins for existing or new customers, we may lose market share and our operating
results would be negatively impacted.
If we are unable to compete in the markets for our products, our financial results will be adversely impacted.
The market for our products, specifically the GPU and mobile and consumer markets are extremely competitive, and we expect competition to
intensify as current competitors expand their product offerings, industry standards continue to evolve and others realize the market potential of mobile and
consumer products and services. Our current competitors include the following, some of which have greater financial, technical and management resources
than us:
• suppliers of GPUs, including chipsets, that incorporate 3D graphics functionality as part of their existing solutions, such as Advanced Micro
Devices Inc., or AMD, Intel Corporation, or Intel, Matrox Electronics Systems Ltd., Silicon Integrated Systems, or SIS, and
VIA Technologies, Inc.;
• suppliers of system-on-a-chip products that support tablets, netbooks, PNDs, PMPs, PDAs, cellular phones, handheld devices or embedded
devices such as AMD, Broadcom Corporation, Freescale Semiconductor, Inc., Fujitsu Limited, Imagination Technologies Ltd., Intel, Marvell
Technology Group Ltd., NEC Corporation, Qualcomm Incorporated, Renesas Technology Corp., Samsung Electronics Co., Ltd., Seiko Epson
Corporation, STMicroelectronics, Texas Instruments Incorporated, and Toshiba America Electronic Components, Inc.; and
• licensors of graphics technologies such as ARM Holdings plc, and Imagination Technologies Group plc.
We expect competition to increase from both existing competitors and new market entrants with products that may be less costly than ours, or may
provide better performance or additional features not provided by our products. In addition, it is possible that new competitors or alliances among competitors
could emerge and acquire significant market share. Furthermore, competitors with greater financial resources may be able to offer lower prices than us, or
they may offer additional products, services or other incentives that we may not be able to match. In addition, many of our competitors operate and maintain
their own fabrication facilities and have longer operating histories, greater name recognition, larger customer bases, and greater sales, marketing and
distribution resources than we do.
Our ability to compete will depend on, among other factors, our ability to:
• continue to keep pace with technological developments;
• develop and introduce new products, services, technologies and enhancements on a timely basis;
• become a preferred partner for operating system platforms, such as Android and Windows Mobile;
• transition our semiconductor products to increasingly smaller line width geometries;
• obtain sufficient foundry capacity and packaging materials; and
• succeed in significant foreign markets, such as China and India.
If we are unable to compete in our current or new markets, demand for our products could decrease which could cause our revenue to decline and our
financial results to suffer.
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