Is NVIDIA Pulling Away in the Tablet Market?

For the past couple of years, Qualcomm (NASDAQ: QCOM  ) has dominated the market for smartphone processors, boosted by its leadership in integrated mobile processors. However, new rival NVIDIA (NASDAQ: NVDA  ) has had much more success in tablets. With NVIDIA looking to encroach on Qualcomm's territory with its first integrated mobile processor -- Tegra 4i -- Qualcomm would like to reciprocate by gaining share in the non-Apple tablet market. However, from a performance standard, NVIDIA may be pulling away.

Tegra 4: the fastest processor
At the 2013 Consumer Electronics Show, NVIDIA released a new top-of-the-line mobile application processor: Tegra 4. While NVIDIA touted the chip as the "world's fastest mobile processor," industry observers were understandably cautious, given the fast-moving pace of mobile processor development. For example, Qualcomm also announced a new high-end chip at CES: the Snapdragon 800, which it touted as 75% faster than the previous-generation S4 chip.

However, a recent analysis from Microprocessor Report suggests that the Snapdragon 800 will not measure up to Tegra 4 in terms of pure performance. Qualcomm's Snapdragon processors are designed with power-efficiency in mind, whereas NVIDIA was willing to use more power to generate extra performance. The Microprocessor Report analysts rightly conclude that this differentiation makes Tegra 4 more appealing for tablets, which usually have larger batteries and fewer power constraints as a result.

If Tegra 4 does have a significant performance advantage compared to Snapdragon 800, it suggests that NVIDIA has actually widened its performance lead in the current generation of chips. Last year's dual-core Snapdragon S4 managed to perform nearly as well as the quad-core Tegra 3, presumably because of its more advanced Krait architecture. NVIDIA upped its game this year by moving from the older A9 architecture to the faster A15 architecture, while also going from just 12 GPU cores in Tegra 3 to 72 in Tegra 4.  This has more than offset the improvements that Qualcomm has made.

Attacking the smartphone segment
NVIDIA was able to maximize Tegra 4's performance by compromising on power efficiency. This would ordinarily take the company out of the running for smartphone design wins. However, NVIDIA returned to the A9 architecture for its new Tegra 4i integrated mobile processor, in order to be more battery-friendly. The company believes that this will be "good enough"; Tegra 4i still packs 60 GPU cores (five times more than Tegra 3) to complement its quad-core processor. Performance will probably be comparable to or slightly behind the Snapdragon 800, but that should be enough to gain vendor consideration, particularly for mid-range phones.

Foolish conclusion
NVIDIA's decision to split its processor line in two was a wise choice. With Tegra 4, it was able to produce a high-performance processor that should bolster its advantage vis-a-vis Qualcomm in the Android/Windows RT tablet market. However, rather than trying to market a power-hungry chip to smartphone designers, NVIDIA designed a much more power-efficient integrated mobile processor in Tegra 4i. This strategy should pay off for investors over the next year or two, as NVIDIA grows in both the tablet and smartphone markets.

NVIDIA was ahead of the curve launching its mobile Tegra processor, but investing gains haven't followed as expected, with the company struggling to gain momentum in the smartphone market. The Motley Fool's brand-new premium report examines NVIDIA's stumbling blocks, but also homes in on opportunities that many investors are overlooking. We'll help you sort fact from fiction to determine whether NVIDIA is a buy at today's prices. Simply click here now to unlock your copy of this comprehensive report.


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