NVIDIA 2012 Annual Report Download - page 16

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Table of Contents
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 new consumer products and technologies which incorporate our products do not achieve market acceptance, our business could be negatively
impacted.
The success of our business also depends on market acceptance of new consumer products and technologies, such as smartphones, smartbooks, tablets
and other similar consumer electronics devices, which contain our products. As markets for these new consumer products emerge, we may encounter new
sources of competition as well as customers who have different requirements than those in the PC business. If market acceptance of such products and
technologies is not attained, our ability to compete and maintain or increase revenues will be adversely affected.
Our ability to be successful in emerging consumer product markets depends in part on our ability to cultivate new industry relationships in these market
segments. As the number and variety of Internet-connected devices increase, we will need to improve the functionality of our products to succeed in these
new markets, which may require significant time and resources on our part to design our products which could negatively impact our business.
Business disruptions could seriously harm our future revenue and financial condition and increase our costs and expenses.
Our worldwide operations could be disrupted by earthquakes, telecommunications failures, power or water shortages, tsunamis, floods, hurricanes,
typhoons, fires, extreme weather conditions, climate change, medical epidemics or pandemics and other natural or man-made disasters or catastrophic events.
The occurrence of any of these business disruptions could result in significant losses, seriously harm our revenue and financial condition, adversely affect our
competitive position, increase our costs and expenses, and require substantial expenditures and recovery time in order to fully resume operations. Our
corporate headquarters, and a portion of our research and development activities, are located in California, and other critical business operations and some of
our suppliers are located in Asia, near major earthquake faults known for seismic activity. In addition, a majority of our principal IT data centers are located in
California, making our operations vulnerable to natural disasters or other business disruptions occurring in this geographical area. The manufacture of product
components, the final assembly of our products and other critical operations are concentrated in certain geographic locations, including Taiwan, China and
Korea. Our operations could be adversely affected if manufacturing, logistics or other operations in these locations are disrupted for any reason, including
natural disasters, information technology system failures, military actions or economic, business, labor, environmental, public health, regulatory or political
issues. The ultimate impact on us, our significant suppliers and our general infrastructure of being located near major earthquake faults and being consolidated
in certain geographical areas is unknown. However, in the event of a major earthquake or other natural disaster or catastrophic event, our revenue, profitability
and financial condition could suffer.
In late July 2011, Thailand began experiencing severe flooding that has caused widespread damage to the local manufacturing industry. PC
manufacturers obtain disk drive components used in its PCs from suppliers with operations in Thailand that were and continue to be severely impacted by the
flooding. These PC manufacturers have and expect to continue to experience a short-term reduction in the supply of these disk drive components. As a result,
in our fourth quarter of fiscal year 2012 shipments of PCs by some PC manufacturers were reduced, which reduced the demand for our GPUs. In addition,
higher disk-drive prices constrained the ability of some PC manufacturers to include a GPU in their systems which also reduced demand for our GPUs and
negatively impacted our financial results for the fourth quarter of fiscal year 2012.
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