NVIDIA 2003 Annual Report Download - page 4

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PART I
ITEM 1. BUSINESS
Overview
We are one of the world’s largest “fabless” semiconductor companies, supplying graphics and media
communications processors and related software that are integral to personal computers, or PCs, professional
workstations and digital entertainment platforms. We provide an architecturally compatible “top-to-bottom”
family of award-winning graphics processing units, or GPUs, which set the standard for performance, quality,
compatibility and features for a broad range of personal computing platforms. Our graphics and communications
processors are used for a wide variety of applications, including games, digital content creation, personal digital
image editing, business productivity and product and industrial design. Our mission is to be the most important
visual computing company in the world. We were incorporated in California in April 1993 and reincorporated in
Delaware in April 1998.
Interactive 3D graphics are integral to various computing and entertainment platforms such as workstations,
consumer and commercial desktop PCs, Internet appliances and video gaming consoles. 3D graphics is a
powerful broadband medium that enables the communication and visualization of information, whether it is in
professional applications like digital content creation and computer assisted design and computer assisted
manufacturing, or CAD/CAM, or commercial applications like financial analysis and business-to-business
collaboration or simply surfing the Internet or playing games. The visually engaging and interactive nature of
3D graphics responds to consumers’ demands for a convincing simulation of reality beyond what is possible with
traditional 2D graphics. We expect that the fundamental interactive capability and distributive nature of
3D graphics will make it the primary broadband medium for a digitally connected world.
We believe that a PC’s interactive 3D graphics capability represents one of the primary means users
differentiate among various systems. PC users today can easily differentiate the quality of graphics and prefer
PCs that provide a superior visual experience. These factors have dramatically increased demand for 3D graphics
processors. Mercury Research estimates that 188.6 million 3D graphics processors were sold worldwide in 2002
and that 275.3 million will be sold worldwide in 2006.
Continuing advancements in semiconductor process and manufacturing have made available more powerful
and affordable microprocessors and 3D graphics processors, both of which are essential to deliver interactive
3D graphics to the PC market. Additionally, the industry has broadly adopted Microsoft Corporation’s Direct3D
Application Programming Interface, or API, and Silicon Graphics Inc.’s, or SGI’s, OpenGL API, which serve as
common and standard languages between software applications and 3D graphics processors, allowing the
development of numerous 3D applications and resulting in increased consumer demand.
We believe that a substantial market opportunity exists for providers of performance 3D graphics
processors, particularly as performance 3D graphics have become an increasingly important requirement and
point of differentiation for PC original equipment manufacturers, or OEMs. Consumer PC users demand a
compelling visual experience and compatibility with existing and next-generation 3D graphics applications at an
affordable price. Application developers require high-performance, standards-based 3D architectures with broad
market penetration. Since graphics is a key point of differentiation, PC OEMs continually seek to incorporate
leading-edge, cost-effective 3D graphics solutions to build award-winning products. We believe that providers of
interactive 3D graphics solutions compete based on their ability to leverage their technology expertise to
simultaneously meet the needs of end users, application developers and OEMs.
Our Products
We have five major product families: GeForce, nForce, GeForce Go, Quadro and TNT2. In addition, we sell
a two-processor chipset for use in the Xbox video game console. Our entire product line provides superior
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