Having recently acquired a set of patents developed and owned by IPWireless (See Our Article: Patents From IPWireless Support Nvidia’s Growing Mobile Business), Nvidia (NASDAQ:NVDA) takes yet another significant step towards its growing mobile computing business with the introduction of its Kai platform. The platform, which is specifically designed to bring down prices of Android tablets could well fuel the growing sales of Nvidia’s Tegra 3 processors. The mobile and game console division contribute a little over 8% to our price estimate for Nvidia, which at $20.98 stands at a premium of 60% to the current market price.
Nvidia’s Kai Strategy to Power Android With A Lower Price Point
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Cost is one of the biggest hurdles that makers of Android tablets have had to overcome, but devices like the Kindle Fire prove that a $199 price point is not unachievable. While the Kindle Fire benefits from an economy of scale only a retail giant like Amazon (NASDAQ:AMZN) could enjoy, Nvidia is looking to do its part to drive down prices through the introduction of the Kai platform. 
The Kai platform, which is expected to be launched later this year plans to make cheap Android tablets a lot more powerful. The platform will be based on its Tegra 3 System on a chip, which currently appears in several high-end Android phones and tablets and will let device makers bring quad-core tablets to market for $199. The company claims to achieve the same through innovations developed to reduce power, that’s used by the display and lower cost components within the tablet.
As a result of the direct effect of Nvidia’s low-cost Kai platform it becomes possible to build Tegra3 quad-core Android devices for low-cost, which keeps the finished devices below the $200 price mark. 
Growing Revenues From Smartphone and Tablets
Nvidia’s consumer business registered a 21% increase on account of rising sales of Tegra3 processors. The world’s first Tegra 3 phone was launched in February by HTC and Nvidia plans to launch around 30 by end of this year.
Fueled by surging growth in smartphone and tablet markets, the company is ramping up production of its Tegra 3 processors as it expects to ship about 25 million processors in 2012, almost doubling its shipments from 2011.  We estimate Nvidia’s revenue from the mobile and game console division to reach $0.8 billion by end of this year and more than double by the end of our forecast period.
You can alter the values in the graph above to see how an upside or downside to our estimate impacts Nvidia’s overall valuation.Notes:
- Nvidia’s Kai platform aims to being low cost quad-core Android 4.0 tablets to market, Phandroid, May 23, 2012 [↩]
- Nvidia planning on having 30 Tegra 3 based devices this year, May 24, 2012 [↩]
- Estimated Brisk Tegra3 Sales to Benefit Taiwan’s Contract Supplies, cens.com, Dec 21, 2011 [↩]