As shares tumble, Nvidia faces minor meltdown

Nvidia is in the throes of a minor meltdown. Its share price is collapsing as it grapples with widespread product defects, a resurgent Advanced Micro Devices, and a weak market.

It all started when Nvidia released a statement on July 2 saying it would take a $150 million to $200 million charge to cover the costs for repair and replacement of defective graphics silicon in notebook PCs. Though Nvidia didn't name any names, Hewlett-Packard, Apple, and Lenovo, among others, use Nvidia graphics chips in their notebooks.

Then on Thursday, July 3, shares plunged $5.54, or just over 30 percent, and closed at $12.49. And share prices have continued to fall--though how much of the post-30-percent drop can be attributed to the weak stock market is not clear.

"There are two piece of news. One is the technical problem, the other part is that (Nvidia) isn't happy with where their business is going," said Dean McCarron, principal at Cave Creek, Ariz.-based Mercury Research.

Keener-than-usual competition is adding to product-defect woes. "Pricing has been more aggressive," McCarron said, referring to more competitive products from AMD's ATI graphics unit. "They did make some price adjustments on their GPU (graphics processing unit) products based on AMD being more competitive," McCarron said.

PC makers such as HP and Toshiba are also using more AMD-ATI graphics chips in notebook PCs, though the impact of this trend may be felt later rather than sooner. "I wouldn't necessarily look at it as being a tremendous share shift. We won't know until the end of the quarter. My suspicion is that (this quarter) a market share shift could be a small component," he said.

Beyond Nvidia's internal problems and the inter-company rivalry with AMD, McCarron sees a bigger issue looming that may affect not only Nvidia in a big way but AMD and Intel, too. "I am seeing some early signs that the market is weaker than forecast. China in particular seems to be much softer," McCarron said. This is a concern because China is now driving a lot of the growth, he said.

Stateside, an ill-timed Rambus lawsuit against Nvidia falls into the kick-them-when-they're-down category. Rambus, which makes a living--though not that successfully in recent years--suing other companies for patent infringement, has now set its sights on Nvidia. The Los Altos, Calif.-based company filed a lawsuit Thursday claiming Nvidia products with memory controllers for synchronous dynamic random access memory (SDR) and double data rate memory (DDR, DDR2, DDR3, GDDR, and GDDR3) infringe 17 Rambus patents.

But product defects will be the big issue that dogs Nvidia over the summer and weighs on its stock price. Here is an excerpt from Nvidia's 8-K filing with the Securities and Exchange Commission on July 2. "While we have not been able to determine a root cause for these failures, testing suggests a weak material set of die/package combination, system thermal management designs."

McCarron said in some cases "you're getting enough mechanical stress that you're actually breaking the bond between the chip and the motherboard" which can cause a system with an Nvidia chip to fail.

[CmdrRickHunter]

I was actually reading about this on wikipedia. Past technologies allow for thermal expansion because there's some distance of metal forming each pin. As things get closer to the bleeding edge, however, BGA and similar technologies have shortened that distance of metal so greatly that such sheering of the bond between chip and mobo are very possible.

The real question is why is this an issue? Did NVidia underestimate their heat output, overestimate their materials, or are card makers not putting enoguh cooling on their chips?

[Zaunto]

This happening due to a design flaw of NVidia, and instead of being up front about it and recalling the chips, they actually are blaming the OEM's, Chip manufacturer (they just design the chips. TMSC builds them) and "user usage patterns". Consider this- ATI's GPU's aren't failing in notebooks. Now here comes RAMBUS with a lawsuit. What do they hope to gain? There won't be much left after that 200 million charge for repairs to customer systems. Intel will have to buy them at that point, or they won't stay afloat.

[rahlquist]

Umm ATI has some of the same BGA issues. May not on the same scale, however I had a Thinkpad T41 that like many others suffered a BGA related failure shortly after warranty ran out. Google around for terms like Apple, BGA, ATI, 7500, Failure and you will see there are plenty of threads out there about the same issue. BGA is fine for small packages but get it into the 50 'pins' and greater territory and it needs a SOLID board with no FLEX or else you're bound to eventually have a failure IMHO. Unfortunately a laptop gets a lot of abuse and picking one up poorly like say from one corner can stress BGA joints as the whole laptop flexes.

[Tod Smith]

It thing the GPU market has reached it's themal management point. Consider that the XBOX 360 GPU MFT by ATI has simular issues.

Also I will watch my warranty for my next Graphics Video Card.

[lookiehere]

"Rambus, which makes a living--though not that successfully in recent years--suing other companies for patent infringement, has now set its sights on Nvidia."
Wow, you sure haven't done your homework, have you? I won't bother to convince you that Rambus actually invented the technologies that Nvidia's graphics cards use. That will come out eventually with the resolution of court proceedings. But making a living out of suing??? You ARE KIDDING, right? LMAO, Rambus has actually suffered financially because of having to sue to get payment for their inventions from the very beginning. That information is readily available in their quarterly and yearly audits required of all stock companies. But that is sure to change although it might take just a bit longer. Justice moves at an excruciatingly slow pace in this country, but eventually infringing companies will have to pay for the use of Rambus inventions instead of just stealing their ideas as they have been doing for way, way too long now.

[Vigo245]

They deserve to go out of business. I have one of their failed 700 series motherboards. I get video corruption when playing videos or games and after 4 bios updates meant to fix the problem and I am not alone . This company is ling out its ass to stay alive and should have recalled these faulty boards months ago. Now I must pay at my cost to replace the board with an intel chipset board so I can watch videos. Just look at the evga forums its a total meltdown every 700 series board has it and its not fixed. http://www.evga.com/forums/tt.asp?forumid=5 Some people are even on their 4TH RMA. Nvidia is stalling for time for our warranties to expire. Then take into consideration nvidia removed full screen video overlay from their drivers to appease the MPAA and MS for vista even though ATI drivers still have it. I have learned my lesson and will never buy nvidia again. I wish them bankruptcy.

[Vigo245]

They deserve to go out of business. I have one of their failed 700 series motherboards. I get video corruption when playing videos or games and after 4 bios updates meant to fix the problem and I am not alone . This company is ling out its ass to stay alive and should have recalled these faulty boards months ago. Now I must pay at my cost to replace the board with an intel chipset board so I can watch videos. Just look at the evga forums its a total meltdown every 700 series board has it and its not fixed. http://www.evga.com/forums/tt.asp?forumid=5 Some people are even on their 4TH RMA. Nvidia is stalling for time for our warranties to expire. Then take into consideration nvidia removed full screen video overlay from their drivers to appease the MPAA and MS for vista even though ATI drivers still have it. I have learned my lesson and will never buy nvidia again. I wish them bankruptcy.