Nvidia Aims To Develop The Android Gaming Market With Its SHIELD Set-Top Box, Which Is Now Available For Sale

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Almost three months after it was first showcased at the Game Developer Conference in San Francisco, Nvidia (NASDAQ:NVDA) launched its SHIELD set-top box in the U.S. and Canada earlier this week. Nvidia’s SHIELD comes in two versions: SHIELD ($199.99) and SHIELD Pro ($299.99), which comes with an integrated 500 GB HD and bundled with the critically acclaimed game, Borderlands: The Pre-Sequel!. One can even get a a remote control with voice search for $49.99, a stand for $29.99 and additional controllers for $59.99 each. The device is powered by Nvidia’s Tegra X1 processor, which has a 256-core Maxwell architecture GPU and 64-bit CPU. Nvidia claims that are over 200 games on Android TV, and almost 20 titles are coming only to NVIDIA SHIELD within a few months of launch. The company also launched a 1080p game-streaming service enabled by its Grid server GPU platform, and claims that some of the world’s leading game developers and publishers have embraced Shield and the GRID service. (Read Press Release)

SHIELD is lower priced than the PlayStation 4 ($400) and Xbox One ($400), but more expensive than Apple TV ($99), Amazon’s Fire TV ($99), and Roku’s hardware ($50-$100). However, many believe that its gaming capabilities are far superior than that of Apple TV, Amazon’s Fire TV, and Roku. [1] Nvidia does not see SHIELD as a game console competitor, instead sees the device leveraging Android for more entertainment content. Though the initial reviews for SHIELD have not been very enthusiastic, we believe it is too soon to judge how the device fares in the gaming market. Whether Nvidia is successful in shifting loyalties of gaming enthusiasts from PlayStation 4 or Xbox One to Shield, we can only wait and watch.

Nvidia Is Eying The Android Gaming Market To Expand Its Tegra Revenue Base

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Nvidia launched Shield, its maiden attempt as a gaming hardware provider, in July 2013. In Q4 2014, the company powered the holiday season’s two best-reviewed Android tablets, the Google Nexus 9 and its own SHIELD Tablet. More than a dozen media outlets recommended SHIELD in their holiday gift giving guides. Over the course of last quarter, SHIELD, which has pioneered a premium gaming experience for tablets, became one of the very first devices to be upgraded to the Google’s latest OS, Android 5.0 Lollipop. [2]

The gaming hardware market was worth $23.6 billion in 2012 and the global gaming market is estimated to cross $30 billion by 2015. [3] Nvidia aims to focus on developing the Android gaming market. Android is the world’s largest operating system platform, and the company believes that over time it will also be one of the world’s largest gaming platforms. Nvidia intends to leverage the capability and expertise it has developed in the PC industry in the last 15 to 20 years for the Android gaming market.

Nvidia claims that the mobile gaming market is a $70 billion market and is growing rapidly internationally. The mobile cloud is probably one of the most important disruptions in the history of computing, and yet there’s really no computer gaming architecture that serves mobile cloud very well. According to Nvidia, SHIELD offers  the platform that allows the mobile cloud to bring gaming to an under-served and new market. Given its strong graphics and processing capabilities, the company is able to deliver a compact powerful and optimized system to eager gamers.

Our price estimate of $23 for Nvidia is almost in line with the current market price. Currently, Nvidia derives approximately 12% of its revenue from the Tegra division, and we expect the same to account for more than 20% of the company’s revenue by the end of our review period.

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Notes:
  1. Nvidia unveils $199 Android set-top, game streaming service, Seeking Alpha, March 4, 2015 []
  2. Nvidia’s Q4 2015 Earnings Call Transcript, Seeking Alpha, February 11, 2015 []
  3. PC Gaming Hardware Market to Hit $23.6 Billion in 2012, Jon Peddie Research, May 3, 2012 []