NVIDIA 2016 Annual Report Download - page 155

9
Seasonality
Our GPU and Tegra processor products serve many markets from consumer PC gaming to enterprise workstations to
government and service provider cloud datacenters; however, a majority of our revenue is consumer focused. Our consumer
products have typically seen stronger revenue in the second half of our fiscal year. However, there can be no assurance that
this trend will continue.
Manufacturing
We do not directly manufacture semiconductor wafers used for our products. Instead, we utilize what is known as a
fabless manufacturing strategy for all of our product-line operating segments whereby we employ world-class suppliers for
all phases of the manufacturing process, including wafer fabrication, assembly, testing and packaging. This strategy uses
the expertise of industry-leading suppliers that are certified by the International Organization for Standardization in such
areas as fabrication, assembly, quality control and assurance, reliability and testing. In addition, this strategy allows us to
avoid many of the significant costs and risks associated with owning and operating manufacturing operations. While we
directly procure certain raw materials used in the production of our products, such as substrates and a variety of components,
our suppliers are responsible for procurement of the majority of the raw materials used in the production of our products.
As a result, we can focus our resources on product design, additional quality assurance, marketing and customer support.
We utilize industry-leading suppliers, such as Taiwan Semiconductor Manufacturing Company Limited and Samsung
Electronics Co. Ltd, to produce our semiconductor wafers. We then utilize independent subcontractors, such as Advanced
Semiconductor Engineering, Inc., BYD Auto Co. Ltd., Hon Hai Precision Industry Co., Ltd., JSI Logistics Ltd., King Yuan
Electronics Co., Ltd. and Siliconware Precision Industries Company Ltd. to perform assembly, testing and packaging of
most of our products and platforms. We purchase substrates from IbidenCo., Ltd., Nanya Technology Corporation, and
Unimicron Technology Corporation.
We typically receive semiconductor products from our subcontractors, perform incoming quality assurance and then
ship the semiconductors to contract equipment manufacturers, or CEMs, distributors, motherboard and AIB customers from
our third-party warehouse in Hong Kong. Generally, these manufacturers assemble and test the boards based on our design
kit and test specifications, and then ship our products to retailers, system builders or OEMs as motherboard and add-in
board solutions.
Working Capital
We focus considerable attention on managing our inventories and other working-capital-related items. We manage
inventories by communicating with our customers and partners and then using our industry experience to forecast demand
on a product-by-product basis. We then place manufacturing orders for our products that are based on forecasted demand.
The quantity of products actually purchased by our customers as well as shipment schedules are subject to revisions that
reflect changes in both the customers' requirements and in manufacturing availability. We generally maintain substantial
inventories of our products because the semiconductor industry is characterized by short lead time orders and quick delivery
schedules. A substantial amount of our inventories are maintained as semi-finished products that can be leveraged across a
wide range of our processors to balance our customer demands.
Our existing cash and marketable securities balances increased by 9% to $5.04 billion at the end of fiscal year 2016
compared with the end of fiscal year 2015. We believe that these balances and our anticipated cash flows from operations
will be sufficient to meet our operating, acquisition, capital expenditure and intended capital return to shareholders needs
for at least the next twelve months.
Research and Development
We believe that the continued introduction of new and enhanced products designed to deliver leading visual computing
technology is essential to our future success. Our research and development strategy is to focus on concurrently developing