Nvidia Eyeing x86 Processor Market, Says Analyst

In the coming months and years, Intel and Advanced Micro Devices are looking to change the way the world thinks about computing by combining the CPU and graphics on the same piece of silicon.

In 2010, Intel plans to release "Arrandale," a microprocessor that combines a 32-nanometer microprocessor along with a 45-nm graphics chip and the chip set. Then, in 2011, AMD plans to unveil its much-talked-about Fusion project that combines elements of the CPU and GPU (graphics processing unit).

For years, Nvidia, which is best known for its graphics, sold chip sets that supported x86 processors for both Intel and AMD. All told, chip sets account for about 30 percent of Nvidia's revenue, according to a recent report. So, when these new versions of microprocessors appear, what will happen to Nvidia?

The answer, according to Doug Freedman, an analyst with Broadpoint AmTech, is that Nvidia plans to start making its own x86 processors "sooner rather than later." If Nvidia enters the x86 market, the company can target mainstream desktops and notebooks and low-end mininotebooks or netbooks with a combination of CPUs, graphics chips and chip sets.

For a number of years, many speculated that Nvidia wanted to get into the x86 processors business by buying Via Technologies, the only other company that makes x86 CPUs. However, Freedman wrote in a Nov. 3 research note that Nvidia has recently hired engineers from Transmeta—a company that once challenged both Intel and AMD but recently sold off all of its intellectual property.

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"We believe internally developed x86 solutions are more likely than external acquisitions (i.e. VIA Technologies)," Freedman wrote in his research note. "We believe that [Nvidia] has hired former Transmeta staff extensively, and that instruction code 'morphing' requirements have declined as more x86 instructions have come off of patent coverage.

"In addition to the types of microprocessors Intel and AMD are now building, Nvidia is also involved in an ongoing legal dispute with Intel that centers on chip sets. Nvidia has now stopped making chip sets of next-generation Intel processors until the court case is settled.

"Nvidia could lose leading access to emerging PCI express standards [and] compatibility requirements for its peripheral discrete GPU cards," Freedman wrote.

Finally, Intel is moving ahead with building its own type of graphics processor called "Larrabee," which could mean that Intel will no longer need any of Nvidia's graphics technology. At the same time, Nvidia is moving into new territory—high-performance computing—that has traditionally used microprocessors instead of graphics.

These forces have pushed Nvidia and Intel apart, which means Nvidia needs to develop new ways to make revenue. (For its part, AMD inherited the ability to make its own chip sets when it acquired ATI, which means it now relies less on Nvidia for chip sets.)

In his research note, Freedman said there are several challenges to Nvidia making its own x86 processors, as the company does not own its own manufacturing facilities and foundries such as Taiwan Semiconductor Manufacturing do not have the facilities to produce leading-edge processors.

"Die size and performance may not be fully optimized by foundries as manufacturing investments address a broader range of semiconductor customers' needs," Freedman wrote. "Platform development costs are likely to be underestimated."

In addition, Nvidia is not well-known outside the gaming community, Freedman wrote.