NVIDIA Likely Won’t Be in the Next iPad

Fellow Fool contributor Timothy Green believes that NVIDIA (NASDAQ: NVDA  ) could score a GPU IP licensing win within Apple's (NASDAQ: AAPL  ) next-generation iPad. Green lays out a compelling case, claiming that because Apple tends to care a ton about GPU performance, it could very well license NVIDIA's GPU technology and integrate it into its A-series system-on-chip designs.

Unfortunately, as nice as this would be for NVIDIA shareholders from a publicity perspective -- the actual royalties would probably amount to maybe $20-40 million, depending on the royalty rate -- this is exceptionally unlikely.

Apple uses its Imagination
Apple's GPU IP supplier for many years has been U.K.-based Imagination Technologies (LSE: IMG  ) . Over the years, Imagination has gone from a small GPU vendor that was marginalized in the PC graphics wars to the world's leading vendor of GPU IP for all sorts of devices -- in particular, low-power applications such as smartphones and tablets. Since that time, Imagination's designs have been well-known for having great performance in a very small footprint in both power and area.

Apple, which actually owns a roughly 10% stake in the IP company, has frequently been an early adopter of Imagination's PowerVR designs. This has allowed Apple to routinely launch phones and tablets with bleeding-edge graphics performance well before many of its competitors. Further, at Imagination's most recent earnings call, management pointed out that the company would be moving faster in developing new iterations of its GPU IP:

Source: Imagination Technologies

Apple has traditionally used Imagination Tech's GPUs, and its driver teams and iOS-optimization teams have extensive experience with Imagination's GPUs. A move to another third-party architecture, such as NVIDIA's Kepler or upcoming Maxwell, wouldn't be impossible, but it would require some pretty serious incentive to do so that may not be there.

Apple is doing its own GPU, anyway
While some may argue that NVIDIA's advances over time may ultimately push Apple to go with NVIDIA's GPU IP, it's important to note that Apple is actually building its own GPU. This GPU, like Apple's custom SoCs and CPU cores, is likely to be custom-tailored to exactly what Apple is looking for. Given that Apple is already a silicon powerhouse, and also that Apple is also a software and user-experience master, the case for going with a custom GPU is pretty clear.

This means that Imagination is at serious risk of losing the Apple account in the longer term, but also that NVIDIA's chances of finding a home within the iPad are pretty minimal. It's not inconceivable to think that NVIDIA could license its GPU IP to other merchant vendors, although it's likely that NVIDIA's intention is to go after either Apple or Samsung, where its Tegra chips are unlikely to play. But the royalties received per unit would be far lower than the gross profit per Tegra chip.

Foolish bottom line
While the idea of NVIDIA winning the GPU IP slot over at Apple is nice, Apple is doing its own GPU for the long term, and in the near term is likely to stick with Imagination's IP. That said, while Apple is unlikely to license NVIDIA's GPU designs, it very well could license its patent portfolio in order to make life easier when trying to design its own high-performance GPU. 

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Read/Post Comments (4) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 25, 2014, at 4:20 AM, iknoerle wrote:

    NVIDIA would have to have the top GPU tech for several years to win over Apple. They would need several years of leapfrog advancements like what they did with Kepler. In other words, it's unlikely.

    But I think they will do just that!

    Someone will dominate the GPU tech in mobile. Why not NVIDIA? They are razor focused on GPU and they are able to leverage their PC advancements into mobile. They have aligned them with tegra K1 and will expand with future iterations.

  • Report this Comment On January 25, 2014, at 1:21 PM, JaanS wrote:

    Ashraf

    Nice article - as usual.

    I address some of the issues in more depth here:

    http://seekingalpha.com/article/1948581-nvidias-tegra-k1-pro...

  • Report this Comment On January 26, 2014, at 10:23 AM, bluesky64 wrote:

    As,

    Lots of points to consider most based on the past.

    I believe the trend downward will proceed as the misses and others take the wins.

  • Report this Comment On January 26, 2014, at 6:37 PM, kaoboy72 wrote:

    I don't see Apple using Nvidia technology on their chip as long as they sell a lot of iphones/ipad. One of the main advantages Apple has over their competitors that cobble industry standard parts together is that they have complete ownership over their proprietary technology. By having complete control over their own hardware and software, they can make optimizations that others can't do. The same class of hardware properly optimized easily out perform unoptimized hardware. I'm sure there are a lot of really smart graphics engineers at Apple who are capable of designing high performing gpus.

    Nvidia is trying to get 3d gaming more mainstream on Android. It sees Android as an open gaming platform and a potential rival to the existing console (xbox1 and ps4). It would not surprise me if Nvidia partnered up w/ Google to launch a Android based gaming console. This makes sense because Google has aspirations in this space. GoogleTV and Chromecast is just the beginning. They dominate the phone market and I'm sure they would just love to screw Microsoft by offering a console that's half the cost of xbox one w/ similar spec running off Nvidia chips and charge developers nothing to port their games on.

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