NVIDIA 2008 Annual Report Download - page 21

Our current competitors include the following:
If and to the extent we offer products in new markets, we may face competition from some of our existing competitors as well as from companies with which
we currently do not compete. For example, in the case of our CPB, our Tegra and GoForce products primarily compete in architecture used in multimedia cellular
phones and handheld devices. We believe that mobile devices like phones, music players, and portable navigation devices will increasingly become more
consumer PC
- like and be capable of delivering all the entertainment and web experiences in a handheld device. We cannot accurately predict if we will compete
successfully in any of the new markets we may enter. 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.
Our GPU and MCP products are currently used with both Intel and AMD processors. In February 2009, Intel filed suit against us, related to a patent
license agreement that we signed with Intel in 2004. Intel seeks an order from the court declaring that the license does not extend to a new Intel processor
architecture and enjoining us from stating that we have licensing rights for this architecture. If Intel successfully obtains such a court order, we could be unable
to sell our MCP products for use with these Intel processors and our competitive position would be harmed. In addition, in order to continue to sell MCP
products for use with these Intel processors we could be required to negotiate a new license agreement with Intel and we may not be able to do so on reasonable
terms, if at all.
As Intel and AMD continue to pursue platform solutions, we may not be able to successfully compete and our business would be negatively impacted.
We expect substantial competition from both Intel
’ s and AMD ’ s strategy of selling platform solutions, such as the success Intel achieved with its Centrino
platform solution. AMD has also announced a platform solution. Additionally, we expect that Intel and AMD will extend this strategy to other segments,
including the possibility of successfully integrating a central processing unit, or CPU, and a GPU on the same chip, as evidenced by AMD
’ s announcement of its
Fusion processor project. If AMD and Intel continue to pursue platform solutions, we may not be able to successfully compete and our business would be
negatively impacted.
If our products contain significant defects our financial results could be negatively impacted, our reputation could be damaged and we could lose
market share.
Our products are complex and may contain defects or experience failures due to any number of issues in design, fabrication, packaging, materials and/or use
within a system. If any of our products or technologies contains a defect, compatibility issue or other error, we may have to invest additional research and
development efforts to find and correct the issue. Such efforts could divert our engineers
’ attention from the development of new products and technologies and
could increase our operating costs and reduce our gross margin. In addition, an error or defect in new products or releases or related software drivers after
commencement of commercial shipments could result in failure to achieve market acceptance or loss of design wins. Also, we may be required to reimburse
customers, including our customers
’ costs to repair or replace products in the field. A product recall or a significant number of product returns could be expensive,
damage our reputation, could result in the shifting of business to our competitors and could result in litigation against us. Costs associated with correcting
defects, errors, bugs or other issues could be significant and could materially harm our financial results. For example, in July 2008, we recorded a $196.0 million
charge against cost of revenue to cover anticipated customer warranty, repair, return, replacement and other associated costs arising from a weak die/packaging
material set in certain versions of our previous generation media and communications processor, or MCP, and GPU products used in notebook systems. In
September, October and November 2008, several putative class action lawsuits were filed against us, asserting various claims related to the impacted MCP and
GPU products. Please refer to the risk entitled “We are subject to litigation arising from alleged defects in our previous generation MCP and GPU products,
which if determined adversely to us, could harm our business
” for the risk associated with this litigation.
·
suppliers of discrete MCPs that incorporate a combination of networking, audio, communications and input/output, or I/O, functionality as part of their
existing solutions, such as AMD, Broadcom Corporation, or Broadcom, Silicon Integrated Systems, Inc., or SIS, VIA Technologies, Inc., or VIA, and Intel;
·
suppliers of GPUs, including MCPs that incorporate 3D graphics functionality as part of their existing solutions, such as AMD, Intel, Matrox Electronics
Systems Ltd., SIS, and VIA;
·
suppliers of computer - on - a - chip products that support netbooks, PNDs, PMPs, PDAs, cellular phones or other handheld devices such as AMD, Broadcom,
Fujitsu Limited, Imagination Technologies Ltd., ARM Holdings plc, Marvell Technology Group Ltd, or Marvell, NEC Corporation, Qualcomm Incorporated,
Renesas Technology, Samsung, Seiko
- Epson, Texas Instruments Incorporated, and Toshiba America, Inc.; and
·
suppliers of computer - on - a - chip products for handheld and embedded devices that incorporate multimedia processing as part of their existing solutions
such as Broadcom, Texas Instruments Inc., Qualcomm Incorporated, Marvell, Freescale Semiconductor Inc., Renesas Technology, Samsung, and ST
Microelectronics.
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