Nvidia has announced it will begin licensing its graphics technologies to other companies, allowing for the likes of Apple and Samsung to incorporate previously protected technologies into their products.
Jen-Hsun Huang, Nvidia CEO - Photo: Reuters/Stephen Lam
The move is a new approach for the company as it tries to further take advantage of the burgeoning mobile market, following its modest success with its Tegra line of mobile processors.
"The bottom line is the world has changed and we're expanding our business model to serve markets that we historically could not serve by selling chips alone," Nvidia CEO, Jen-Hsun Huang said.
Although Nvidia has already made an entrance to the mobile processor space, the new licensing deal will enable the company to gain revenue from other mobile processor manufacturers such as Apple, Qualcomm and Samsung. While this route would produce much lower return per chip, it is likely to be a more stable business model.
The move will, however, put Nvidia into direct competition with a couple of established players: ARM and Imagination Technologies. Both British-based outfits already license mobile-oriented graphics technologies to most of the key players in the market, with Imagination Technologies also having backing from Apple and Intel who hold significant stakes in the company.
ARM of course licenses its mobile CPU technology to Nvidia - and every others significant mobile processor manufacturer - so it will be interesting to see if the two continue to work together in the longer term.
For the time being Nvidia has recently launched Tegra 4, which is debuting in the company's mobile game console, Shield. Longer term it will also be integrating LTE features on upcoming versions of Tegra, making them compatible with so-called 4G networks. Currently their lack of LTE technology is harming Nvidia, Intel and other chipmakers as they try to secure design wins. In the 4G space, Qualcomm is dominating the market.
Despite the positive long term prospects for going the licensing route, Huang said that Nvidia's revenue from licensing would trail that from chip sales for a long time, but that gross margins would improve as the company wins more royalties.