What's Next for NVIDIA's Modems?

With NVIDIA bowing out of the mainstream smartphone market, what's the future look like for the company's Icera modem line?

Apr 6, 2014 at 4:30PM

At NVIDIA's (NASDAQ:NVDA) GPU Technology Conference, NVIDIA CEO Jen-Hsun Huang made it quite clear that the company had no further intentions of competing in the highly integrated, cost-sensitive mainstream smartphone applications processor market. With that in mind, an obvious question to ask is whether the company would just go ahead and de-focus its development efforts on the actual cellular modem part of the equation.

Not officially
At the Wells Fargo 4th Annual Tech Transformation Summit, David Wong of Wells Fargo asked Chris Evenden, senior director of investor relations at NVIDIA, the following vis-a-vis NVIDIA's cellular baseband efforts:

David Wong: Chris ... you've exited mainstream smartphones, so where does that leave your baseband capabilities?

Chris Evenden: So we still need the baseband ... if only for automotive. I mean, connectivity is going to become increasingly important in all of those markets. So, we'll keep developing a standalone baseband, voice and data; we're not going to develop an integrated modem/applications processor. That product, you've got one target market in mind, which is mainstream smartphones.

So, we actually get two interesting tidbits of information. First is that NVIDIA does plan to continue developing its own standalone baseband chips (useful for high-end phones, tablets, and -- the star of Tegra's show -- automotive). Next -- and perhaps not surprisingly -- is that the company no longer plans to try to go head-to-head against the remaining players in the integrated apps processor and cellular baseband space.

RIP Tegra 4i
While there had been some encouraging early signs for the company's Tegra 4i (integrated apps processor and baseband), it looks as though the part ultimately failed to gain enough traction to continue developing successors. The problem here, and one that many had feared would ultimately be the case, is that this market is all about bringing in the cheapest, most integrated chip at the lowest possible cost.


NVIDIA's ill-fated Tegra 4i; we barely knew it. Source: NVIDIA. 

Note that while NVIDIA does have its own cellular modem efforts, it doesn't have in-house Wi-Fi, Bluetooth, GPS, and the like to really be able to compete at the integration level with Intel (NASDAQ:INTC), Broadcom, MediaTek, Marvell, and Qualcomm (NASDAQ:QCOM) -- all of which do have this connectivity IP. NVIDIA likely could have picked up some connectivity IP with its cash hoard (and I had actually been expecting it), but it didn't happen.

Tegra 4i will apparently be NVIDIA's last integrated modem and applications processor, with no successors on tap. 

The smartphone apps processor market consolidates ... again
With NVIDIA essentially out of phones, the market essentially comes down to the players I mentioned. However, given that MediaTek and Qualcomm essentially own this market, and given that Qualcomm and Intel are dramatically outspending the remaining players in this market, the consolidation isn't over.


ST-Ericsson's NovaThor line of processors was an early casualty in mobile consolidation. Source: Wikipedia. 

Who's next?
MediaTek is currently selling a lot of product but is very vulnerable, as it appears to be significantly behind both Qualcomm and Intel in modem technology (the latter two are preparing to ship category 6 LTE-Advanced modems while MediaTek won't have a shipping category 4 LTE modem until Q2 2014). Broadcom has struggled pretty heavily, as its investment in cellular has largely destroyed the profitability of its connectivity business -- something will need to give soon. Marvell has done well in the low margin/highly competitive low end, but it seems to not be interested in the high end.

While there's the possibility that Qualcomm simply ends up eating up the lion's share of the market, Intel is investing at roughly the same level and can tolerate extreme losses in order to eventually win -- something that the smaller players can't really afford to do. Intel is buoyed (and R&D amortized) by the very profitable PC and server segments that use much of the same IP that is designed for mobile. Qualcomm has its IP licensing business to hold the line on profitability.

Foolish bottom line
The consolidation will be a long, slow, and heartbreaking process for many stockholders and employees, but we have seen this across semiconductors time and again. NVIDIA has gracefully bowed out of the "mainstream smartphone" ring, but it will continue to develop cellular modems for the other Tegra applications. These other Tegra applications likely won't require as bleeding-edge modem technology, so ultimately the investment level NVIDIA will be putting into its modems will shrink, freeing up cash for more profitable ventures.

With smartphone growth slowing, we've found the next big thing!
If you thought the iPod, the iPhone, and the iPad were amazing, just wait until you see this. One hundred of Apple's top engineers are busy building one in a secret lab. And an ABI Research report predicts 485 million of them could be sold over the next decade. But you can invest in it right now, for just a fraction of the price of Apple stock. Click here to get the full story in this eye-opening new report.

Ashraf Eassa owns shares of Broadcom, Intel, and NVIDIA. The Motley Fool recommends Apple, Intel, NVIDIA, and Wells Fargo and owns shares of Apple, Intel, Qualcomm, and Wells Fargo. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.


Compare Brokers