Expanding its line of Tegra-4 powered devices Nvidia (NASDAQ:NVDA) seems to be on a roll this month. The company started September 2013 with the introduction of Xiaomi Mi3, the first phone based on its Tegra 4 processor, and after much speculation finally introduced its Tegra Note, a reference platform for Android based tablets on September 18. A day after that HP (NASDAQ:HPQ launched two new Tegra 4 powered tablets - the Slate 7 Extreme and the Slate 8 Pro. On September 23, Nvidia boasted yet another product win by announcing that Microsoft’s (NASDAQ:MSFT) next-generation Surface 2 tablet will be powered by Nvidia’s Tegra 4 processor. Nvidia has also received Tegra 4 orders for Asustek and Toshiba devices.
Microsoft’s Surface Windows RT, launched in June last year, was powered by Nvidia’s Tegra 3 processor and failed to garner the expected response. Sales for the first generation Surface tablet still remain weak. However, to spur demand for the Windows RT platform , Microsoft has completely revamped its next-generation Surface tablet. The new device is thinner, lighter and longer-lasting compared to its predecessor. Surface 2 is cheaper, offers 25% higher battery life and has improved speed and graphics performance. With a base price of $499, the device will be available in the market starting October 22.
We have yet to see if Microsoft’s new Surface 2 tablet will help accelerate demand for the Windows RT platform. Nevertheless, we find it encouraging that the company opted for Nvidia’s processors over other competitors.
Nvidia’s Tegra Revenue To Decline In 2013 But Long Term Prospects Look Promising
Having seen its Tegra processor revenue climb by approximately 200% and 30% in 2011 and 2012 respectively, Nvidia anticipates the same to decline by $200 – $300 million this year. Much of the decline can be attributed to the ramp down of Tegra 3 products and the company’s conscious decision to delay the launch of Tegra 4 by one quarter in order to pull up the production of Tegra 4i chips.
Despite the success of its Tegra 2 and Tegra 3 processors, Nvidia had so far been unable to score a high profile design win that could accelerate its progress in the mobile computing domain. However, with an expanding line of Tegra 4 devices and Tegra 4i certification underway (expected in Q3), we expect growth in Tegra shipments to accelerate in the second half of 2013.
Nvidia has been focusing on the lucrative tablet market as a way of challenging Qualcomm’s (NASDAQ:QCOM) growing smartphone dominance. Though its presence in the smartphone market is almost negligible, we expect the LTE certification to help expand its footprint in the market. We expect Tegra to be an important revenue stream for Nvidia and forecast revenues from the division to cross $ 1 billion over our review period.
In addition to tablets and smartphones, the company aims to expand its reach to other large markets where visual computing matters such as auto navigation systems, TV set top boxes and new desktop foreign factors like all-in-one and smart monitors.