NVIDIA 2011 Annual Report Download - page 10

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Research and Development
We believe that the continued introduction of new and enhanced products designed to deliver leading 3D graphics, HD video, audio, ultra-low power
consumption, and system-on-chip architectures is essential to our future success. Our research and development strategy is to focus on concurrently
developing multiple generations of GPUs, including GPUs for high-performance computing, and mobile and consumer products using independent design
teams. Our research and development efforts are performed within specialized groups consisting of software engineering, hardware engineering, very large
scale integration design engineering, process engineering, architecture and algorithms. These groups act as a pipeline designed to allow the efficient
simultaneous development of multiple generations of products.
A critical component of our product development effort is our partnerships with leaders in the CAD industry. We invest significant resources in the
development of relationships with industry leaders, often assisting these companies in the product definition of their new products. We believe that forming
these relationships and utilizing next-generation development tools to design, simulate and verify our products will help us remain at the forefront of the 3D
graphics market and develop products that utilize leading-edge technology on a rapid basis. We believe this approach assists us in meeting the new design
schedules of PC OEM and other manufacturers.
As of January 30, 2011, we had 4,161 full-time employees engaged in research and development. During fiscal years 2011, 2010 and 2009, we incurred
research and development expense of $848.8 million, $908.9 million and $855.9 million, respectively.
Competition
The market for our products is intensely competitive and is characterized by rapid technological change, evolving industry standards and declining
average selling prices. We believe that the principal competitive factors in this market are performance, breadth of product offerings, access to customers and
distribution channels, software support, conformity to industry standard Application Programming Interfaces, or APIs, manufacturing capabilities, processor
pricing, and total system costs. We believe that our ability to remain competitive will depend on how well we are able to anticipate the features and functions
that customers will demand and whether we are able to deliver consistent volumes of our products at acceptable levels of quality and at competitive prices.
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.
A significant source of competition comes from companies that provide or intend to provide GPUs and mobile and consumer products. Some of our
competitors may have greater marketing, financial, distribution and manufacturing resources than we do and may be more able to adapt to customer or
technological changes.
Our current competitors include the following:
suppliers of GPUs, including chipsets that incorporate 3D graphics functionality as part of their existing solutions, such as Advanced Micro Devices, or
AMD, Intel, Matrox Electronics Systems Ltd., Silicon Integrated Systems, and VIA Technologies, Inc.;
suppliers of system-on-a-chip products that support tablets, smartphones, PMPs, internet television, automotive navigation and other similar devices,
such as AMD, ARM Holdings plc, 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.
If and to the extent we offer products in new markets, we may face competition from existing competitors as well as from companies with which we
currently do not compete. We expect substantial competition from both Intel’s and AMD’s strategy of selling platform solutions, including integrating a CPU
and a GPU on the same chip or same package, as evidenced by AMD’s announcement of its Fusion processors and Intel’s announcement of its family of
CPUs codenamed Sandy Bridge. If AMD and Intel continue to pursue platform solutions and integrated CPUs, we may not be able to successfully compete
and our business would be negatively impacted.
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