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.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't 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.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information