Nanotech - The Circuits Blog

Updated at 6:40 p.m. PDT, adding Microsoft Windows 7 and Apple Snow Leopard discussion.

Nvidia on Thursday posted a smaller loss than the year-earlier period but the graphics chip supplier is still grappling with costs related to a chip defect first addressed by the company last July.

Shares of the Santa Clara, Calif.-based company were up in after-hours trading.

Nvidia reported a second-quarter loss of $105.3 million, or 19 cents a share, better than the year-earlier period when it posted a loss of $120.9 million, or 22 cents a share.

Revenue was $776.5 million, down 13 percent, from $892.7 million reported in the second quarter of last year.

Excluding items (non-GAAP basis), Nvidia reported a profit of 7 cents a share, better than analyst estimates of a loss of 2 cents a share.

Jen-Hsun Huang, the president and chief executive officer, said the company's "business is recovering. Product demand is improving, and our strategic investments are leading to new growth." Nvidia expects revenue in the third quarter--ending October 25, 2009--to be up 5 to 7 percent over the second quarter.

Gross margin, a critical profit indicator, was 20.2 percent, above the 16.8 percent reported last year.

However, Nvidia's results were negatively affected by an additional net charge of approximately $119.1 million "to cover costs related to a weak die/packaging material set that was used in certain versions of its previous-generation chips. Although the number of units impacted by this issue remains consistent with the company's initial estimates a year ago, the cost of remediation and repair of impacted systems has been higher than originally anticipated," the company said in a statement.

In July 2008, a $196 million reserve was accrued for the purpose of supporting affected customers around the world. The weak die/package material combination is not used in any products currently in production, the company said.

As early as 2007, Hewlett-Packard listed laptop models affected by the defect. In August 2008, Dell also listed affected models. And Apple said in October that it would repair faulty graphics chips.

On a more positive note, Huang said that future operating systems from Microsoft and Apple will "stimulate growth" in 2010 because of new technologies that take better advantage of the graphics processor, making it a "powerful co-processor" that works in conjunction with Intel processors.

Microsoft's Windows 7 and Apple's Snow Leopard will including programming features called Direct Compute and OpenCL, respectively, that accelerate graphics-based processing for everyday computing tasks.

Intel is endorsing Google's future Chrome operating system, but the chipmaker is being cautious as it already has a successful strategy supplying chips for Windows-based mobile devices.

Last week, makers of processors based on the ARM design, such as Texas Instruments and Qualcomm, were quick to cheer the news of Google's Chrome, which is slated to first appear on Netbooks in 2010.

"We're thrilled about the news that Google just issued," Ramesh Iyer, TI's head of worldwide business development for mobile computing, said last week. "You can see how simple the user interface is and how easy it is to access stuff," he said, referring to current Google applications available on the Web. "Think of (Chrome) as the next-gen of all of that."

Intel was more guarded in its statements. "We welcome Google's move," said Intel spokeswoman Claudine Mangano, but added: "We try to ensure Intel processors run on a variety of software." Chrome is slated to launch simultaneously on both ARM and Intel processors.

Though Intel is officially software agnostic, unofficially its chips are inextricably linked with Microsoft's Windows software as the hardware half of the most popular hardware-software PC platform on earth. And Intel's Atom is already the processor of choice for the most popular Netbooks worldwide from Hewlett-Packard, Dell, Toshiba, Sony, Acer, and others.

Atom will hold more than an 80 percent share of the 23.5 million Netbooks sold in 2009, according to a report released Monday by the Information Network, a New Tripoli, Pa.-based market research company.

Most of those Netbooks run Windows--which Google is looking to displace. "Consumers buying Netbooks so far have voted Windows," said Jeff Orr, senior analyst, mobile content, at ABI Research, in a phone interview.

The ARM chip camp is hoping to link its processors with Google in much the same way Intel is associated with Microsoft's popular Windows software. "Coming from the ARM side, they lack a Windows XP, Windows 7 solution," Orr said.

ARM processors are supplied by chip manufacturers Texas Instruments and Qualcomm, among others, and power devices such as the Palm Pre and T-Mobile Android smartphones, respectively. The Information Network projects that the ARM processor will gain a 55 percent market share of the 96 million Netbooks sold in 2012.

But for the foreseeable future, Netbooks will run Windows on top of Intel's Atom processor. And for those few Netbooks not running Windows, Intel is hedging its bets. The world's largest chipmaker also showed, as part of a technology demonstration, an Atom-based Netbook running Google's Android operating system at Computex.

Where's your comfort zone? Windows, Mac, Linux? An unintellectual, emotional attachment to an operating environment often determines what consumers buy and may determine whether Google Chrome can ultimately compete with Windows.

In the consumer laptop space, specifically Netbooks, there isn't much hope for a Linux-based operating system like Google Chrome in the near term. So, first the bad news.

Market researcher iSuppli released a report Friday that I agree with. It begins with the usual, saying that Google's Linux-based Chrome operating system sets the stage for a battle of the Titans (Google versus Microsoft). But what it said after that affirmed my own convictions (and echoed comments I had heard before from other analysts).

"The small penetration of Linux in Netbooks is not due to any technical shortcomings," said Matthew Wilkins, principal analyst, compute platforms research for iSuppli. "Because the vast majority of people who buy Netbooks are consumers, who do not have a high degree of knowledge of the key players in the OS market, they are going with the names that they know. And in PCs, that name is Microsoft."

Asus fold-unfold mobile device concept: a compelling name-brand hardware-software package can change minds

(Credit: Brooke Crothers)

The report continues: "For Google to be successful, it needs to promote and position its brand so that non-tech-savvy consumers will be comfortable buying a Netbook running its operating system rather than one from Microsoft. This will be a major challenge."

In other words, it's hard to move people out of their comfort zone, particularly if the alternative is fractured like Linux. But there's a silver lining for Google's OS. The comfort zone is shifting. If consumers spend more time on a social-networking site (Facebook, Twitter) or a Web-based productivity environment (Google search, Gmail, Google docs) that becomes their comfort zone (the so-called "cloud") rather than the Windows, or Apple, desktop.

Of course, that's all just theory unless something else happens. What's that extra something? Give consumers a high-profile, respected brand like Google packaged with a slick Netbook and more than a few more could break their ties with Windows (because it becomes irrelevant). Particularly if the price is right.

It's been done before. A charismatic device like the iPhone proves that. In that case, consumers left the tenuous comfort zone of their interface-challenged cell phones in droves and embraced the iPhone.

But this doesn't happen often. And you need a very big, truly innovative company like Apple or Google to pull it off.

Conversations I had this week with both Texas Instruments and Qualcomm executives offer hope in the long term. TI and Qualcomm are building the chips that Chrome will run on and both have been working with Google. (TI told me that they have the Chrome OS running in some form already on their silicon.) Though Intel also says it is working with Google, I suspect Chrome is more of an ARM processor play than an Intel play.

Whatever happens in the next 12 months or so will be interesting and, at the very least, can only add to growing momentum behind mobile devices using ARM processors and non-Windows operating environments.

Texas Instruments and Qualcomm executives talked Wednesday about the opportunities they see for the just-announced Google Chrome operating system.

Prototype Qualcomm Snapdragon processor-based device

(Credit: Qualcomm)

The Chrome operating system is "lightweight," a term that Google uses, meaning the OS runs fine on less hardware. Chrome will initially be targeted at Netbooks--essentially ultra-small laptops--that will be available for consumers in the second half of 2010, according to Google.

Both TI and Qualcomm believe the Google OS will provide more opportunity for new-fangled devices to gain wider acceptance. And both believe this is an opportunity for their respective ARM processors--which power many of the world's cell phones--to gain more ground.

Analysts see the makings of a broad realignment in the computer industry. "What Google is betting on with the Chrome OS (is a) shift in computing and consumer behavior," Charles King, president and principal analyst at Pund-IT, wrote in a research note on Wednesday. "If that scenario truly comes to pass, it could disrupt the efforts of virtually every vendor focused on personal computing."

Texas Instruments, which has been working with Google on the Chrome OS, expects big changes in the design of devices, according to Ramesh Iyer, TI's head of worldwide business development for mobile computing.

"Netbooks are really the tip of the iceberg. We need to fast forward into the future and think of things beyond the Netbook thanks to this initiative from Google," Iyer said in a phone interview. TI's OMAP ARM processor powers a number of cell phones and smartphones including the recently-announced Palm Pre.

"We see the future being cloud computing really. You are walking around with a simple tablet, that is probably no thicker than the thickness of your display. It may have a (physical) keyboard, it may have a soft keyboard. ... Read more

Android running on devices at Computex was "snappy," while Windows 7 less so, according to a Gartner report published Monday. The report concluded that there is momentum behind the ARM chip platform.

"Android is the first Linux OS backed by a strong consumer brand--Google," write analysts Christian Heidarson and Ben Lee in Gartner's Semiconductor DQ Monday Report.

Though they stopped short of endorsing the platform--saying that Android is a work-in-progress--they did offer some hope for future Android-based devices running on ARM processors versus Windows 7-based Netbooks running on Intel's Atom processor. "There is a sense among PC manufacturers that although Android is not ready for prime time today--or tomorrow--it will inevitably get there," they wrote.

The report continued. "When Android did work, we found that the user interface was very snappy on relatively low-performance ARM processors, more so than on Windows 7 on (Intel's) Atom. What we learned about support from critical software vendors convinced us that there is momentum behind ARM in the PC industry, enabled by Android."

In an interview last month, Michael Rayfield, general manager of the mobile business unit at graphics chipmaker Nvidia, echoed this sentiment. "Android has got a roar ahead of it," he said. But he added: "I think it's three of four quarters from a large-screen device." Nvidia is developing its ARM-based Tegra chip platform for Android as well as Windows CE.

Other chipmakers such as Freescale Semiconductor are also touting the potential for Android on ARM-based chips. "The potential that Google has--this has got everybody's attention," said Glen Burchers, director of global consumer segment marketing at Freescale, in an interview last month.

The Gartner report was cited earlier by IDG News.

Nvidia has its own grand scheme for Netbooks, the tiny laptops that have gained wide acceptance running on software and hardware from Microsoft and Intel, respectively.

Michael Rayfield, general manager of Nvidia's mobile business unit

(Credit: Nvidia)

At the giant Computex conference starting Tuesday in Taiwan, Nvidia will be showing hardware running on its Tegra processor and Windows CE, the version of Windows used most prominently to date in business-use handheld computers. And, down the road, Nvidia has high hopes for devices based on Google's Android.

Tegra is a system-on-a-chip that integrates a processor based on a design from U.K.-based ARM and Nvidia's GeForce graphics silicon, among other functions. The goal is to bring robust PC-like graphics to small devices such as Netbooks and handheld devices--the latter also referred to as mobile Internet devices.

In a break from Computex tradition, Nvidia will have phone companies in tow. "We're bringing the carriers in. I've got 100 people showing up from carriers at Computex," Michael Rayfield, general manager of Nvidia's mobile business unit, said in a phone interview Friday.

Tegra will be shown at the trade show in devices that manufacturers "are about ready to release into production," Rayfield said.

"The Internet is all about (Adobe) flash and HD (high-definition) now so we've built a platform that can do that," he said. "There are two operating systems we support. Microsoft Windows CE and, as it becomes more interesting for large screens, (Google) Android," Rayfield said.

"We do Android for smartphones and we're working to do hardware acceleration on Android as it goes to larger displays," Rayfield said. In February at the Mobile World Congress in Barcelona, Nvidia announced that it is working with Google and the Open Handset Alliance to get its Tegra processor into phones based on Google's Android operating system.

Android will likely appear commercially in larger devices, such as Netbooks, by the middle of next year, Rayfield said. "Android, as it stands now, does not do hardware acceleration," he said, referring to graphics-based acceleration of video and other multimedia applications. "We've already got 720p acceleration on Android internally," he said. 720p is a lower-resolution standard for high-definition video.

Rayfield continued. "Android has got a roar ahead of it but I think it's three of four quarters from a large-screen device. And the market wants something interesting before that."

Intel is making a bid to become a force in smartphones. This will test its ability to compete in arguably the most important chip market outside of PCs.

The deal struck this week with Taiwan Semiconductor Manufacturing Co. will put the Intel architecture into the same factories that churn out chips for companies like Qualcomm and Texas Instruments, which use an alternative architecture called ARM--the choice for many small devices, cell phones, and most smartphones, including the Apple iPhone, BlackBerry Storm, and Google-based Android phones.

ARM has always been a thorn in Intel's side. So much so that Intel acquired the StrongARM architecture in 1997, turned into Intel XScale, and aimed it at handhelds (most prominently iPaq handhelds sold by Compaq and then Hewlett-Packard). Before that, StrongARM had been used in the Apple Newton (a primitive precursor to the iPhone) and other small devices.

But Intel sold the money-losing XScale business to Marvell in 2006. And so ended Intel's attempt to compete ARM to ARM in the small device space.

Intel processors are not a player in the market for smartphones like T-Mobile's G1, which uses an ARM-based Qualcomm chip

(Credit: T-Mobile)

What happened? The small consumer device and communications chip business is not the PC business and, consequently, not an area where Intel has historically been competitive. But that doesn't mean Intel can afford to ignore this space. Handheld personal computing has arrived (if you hadn't noticed). The iPhone, Blackberry, and Android phones are virtually handheld PCs--with Intel processors nowhere to be seen.

So this time instead of coming up with an ARM chip, Intel is trying to shoehorn its successful x86 architecture into the ARM universe of smart phones, consumer electronics, and the amorphous, though typically profitable, "embedded" market. TSMC excels in building chips for all of these markets. The world's largest contract chip manufacturer operates successfully on gross margins much lower than Intel's enviable x86 PC margins, typically north of 50 percent (as this CNET Blog Network piece points out).

And one market where Intel would like to succeed (and some would say must succeed) is smartphones because of its sheer size and because "that's where the PC functionality is moving toward," said Doug Freedman at Broadpoint AmTech. Though markets for hardware that goes into, for example, industrial or medical hardware, will be important, it's the smartphone market that will test Intel's ability to compete profitably in a consumer space outside of PCs.

Just how big is the overall cell phone market? On a unit basis, it is about five times the size of the PC market. There were about 1.22 billion handsets shipped in 2008, while the PC market is forecast at 257 million units in 2009, according to Gartner.

But Intel cannot operate the way it does in the PC world--where its credo almost seems to be: if we build it, they (HP, Dell, Acer) will come. This won't work in the cell phone industry. Service providers and handset makers are center stage, hardware is at best a side show. So, hooking up with TSMC is a way for Intel to make itself more palatable to cell phone companies, which are not used to dealing with the 800-pound PC chip gorilla. "By going through a TSMC, it is perceived less as an Intel move and more as, hey, I'm just another source for you the handset maker because you're already used to buying stuff from TSMC," said Ian Lao, an analyst at In-Stat. "It's insulating the gorilla thing."

And it's none too early. Qualcomm is now pushing the performance envelope with its Snapdragon platform, Nvidia is hawking its graphics-intensive Tegra technology, and Texas Instruments is revving up its OMAP chips to achieve better performance per watt.

In other words, while these chip companies are not wavering from their longstanding strong suit of power frugality--an imperative in the cell phone world--they are also beginning to ratchet up chip speeds to 1GHz and above and add more processing cores. And that's Intel's strong suit.

"For ARM developers, multi-core implementations will address much of the performance differential," said In-Stat's Lao. Look no further than Qualcomm. The future Qualcomm QSD8672 chip will be a dual-core Snapdragon that features two CPU computing cores capable of 1.5GHz performance, 1080p high-definition video, Wi-Fi, mobile TV, and GPS. The graphics core is based on Advanced Micro Devices' ATI unit's technology.

Hmm...Dual-core processor, ATI graphics, high-definition video? Sounds a lot like a PC. Indeed one of the burning questions is whether PC makers will begin running Microsoft's operating systems on ARM-based devices, according to Lao.

"The next 9 to 18 months will be quite interesting to watch," he said. "Can Intel get down to the cost and power levels needed? Will they be able to get the carrier and handset makers aboard? There will definitely be a market shakeup."

Nvidia is working with Google on Android phones as it veers off from its Windows-Mobile-only strategy.

On Monday, at the Mobile World Congress in Barcelona, Nvidia announced that it is working with Google and the Open Handset Alliance to get its Tegra processor into Android phones. Tegra is a system-on-a-chip that integrates an ARM applications processor and Nvidia's GeForce graphics silicon, among other functions. The goal is to bring robust PC-like graphics to small devices.

Tegra aims at Android phones

(Credit: Nvidia)

"We welcome Nvidia's support of Android on Tegra," Andy Rubin, Google's senior director of mobile platforms, said in a statement.

Since spring of last year, Nvidia has been talking up Tegra as a chip aimed exclusively at Windows Mobile smartphones. Not anymore. "By supporting Android, manufacturers and operators can now easily use a Tegra processor to build mobile phones," Nvidia said in a statement.

Nvidia also said Monday that its Tegra chip will enable a $99, always-on, always-connected mobile internet device (MID) capable of playing back high-definition video and going for "days between battery charges." This would be based on Windows Mobile, according to Nvidia.

The Santa Clara, Calif., company said it has partnered with ST-Ericsson to add 3G communication capability to the Windows platform.

A couple of freelance writers for the blog VentureBeat say they have ported Google's Android operating system to an Asus Eee PC. But does this constitute a new trend in Netbooks?

Asus Eee PC: Android next?

(Credit: Asus)

Matthäus Krzykowski and Daniel Hartmann said in a post Thursday that they compiled, in four hours, the open-source Android operating system for an Asus Eee PC 1000H Netbook. The two run a start-up called Mobile-facts.

In somewhat breathless prose here's what the authors conclude about Android on Netbooks: "For (a) myriad of (Silicon Valley) software companies, it means a well-backed, open operating system that is open and ripe for exploitation for building upon. Now think of Chrome, Google's Web browser, and the richness it allows developers to build into the browser's relationship with the desktop--all of this could usher in a new wave of more sophisticated Web applications, cheaper and more dynamic to use."

If this was Verizon or Asus saying this, it would be product news. Otherwise, it remains an interesting experiment. The authors say Intel is one contributor working on the adoption of Android to a notebook, as a partner in Google's Open Handset Alliance.

Indeed, OHA does have a long list of illustrious members, many of them large companies (or entities) like China Mobile, Broadcom, LG, NTT DoCoMo, Nvidia, and Samsung.

Qualcomm is a member too. And, by the way, already has a prototype Netbook running Red Flag Linux on top of its Snapdragon processor. And it is worth noting that Qualcomm claims it has first-tier PC companies planning devices, including Acer, Asus, and Toshiba.

Would Qualcomm partners opt for the Android operating system instead? It is also worth noting that Qualcomm supplied the silicon guts for the T-Mobile G1, the first phone to run Google's Android operating system.