Chipmaker Nvidia (
) has released a new version of its Tegra mobile processor. Nvidia
competes mainly with Intel (
) in the mobile processor market.
Although the first Tegra chip lost the market battle to Intel's
Atom processor, Tegra 2 promises significant performance benefits
over its predecessor. According to Nvidia, it runs four times
faster than Tegra 1, consumes less power and can process HD
However, we don't think performance alone can guarantee that
Tegra 2 will be a hit for Nvidia. Rather, we believe that the
success or failure of the Tegra 2 chip will be influenced heavily
by market demand for smartphones running Google's (
) Android mobile operating system. Our analysis follows below.
Tegra 2 and Android
The first generation Tegra chip was optimized for Microsoft's (
) Zune platform, while Tegra 2 is primarily geared toward the
Android mobile device market. Early indicators suggest that Android
device manufacturers are taking Tegra 2 seriously. According to
Nvidia, 50 device makers are currently building Tegra-powered
devices. They include LG (
), which is is building a new line of Android-based smartphones and
tablets around the Tegra 2.
The next generation of Android-based phones are likely to
emphasize performance, which should help Nvidia because of
the Tegra 2's superior processing power.
Nvidia's initial focus on the Android platform essentially
creates a symbiotic relationship between Android and the Tegra 2
processor. The more widely Android is adopted, the more chips
Nvidia will sell.
Nvidia reports Tegra processor sales as part of its mobile and
game console computing chip division, which constitutes 10.8% of
our stock price estimate for the company. We currently expect
revenues from this division to approach $600 million by the end of
the Trefis forecast period, up from about $200 million this
You can drag the trend-line in the chart above to create your
own mobile and game console chip sales forecast for Nvidia and see
how it impacts the company's estimated share value.
Android app library still lags Apple's
The Android OS has been gaining market share rapidly in recent
according to data from tech research firm
. In the second quarter of 2010, worldwide sales of Android-based
phones surged to 10.6 million, up from just 755,000 in the year-ago
Android-based phones accounted for 17.6% of worldwide smartphone
sales in the second quarter of 2010, up from 1.8% in the second
quarter of 2009.
Although Android is now a more popular mobile OS than Apple's (
) iOS, Android offers fewer mobile apps. According
, the Android Market storefront currently offers somewhere between
70,000 and 90,000 apps in its mobile storefront, compared to about
225,000 apps in Apple's App store.
Going forward, we expect Google to improve the Android Market
storefront in an effort to attract more developers and users to its
platform and consequently drive Android-based phone sales.
Positive indicators for the Tegra 2 chip include its superior
performance and growing demand for Android-based smartphones and
The first wave of devices powered by the Tegra 2 chip should hit
the market in the next few months. If successful, they could drive
faster growth in Nvidia's
mobile & game console computing chip
, creating a potential upside for the stock.
You can see
the complete $11.77 Trefis price estimate for
Nvidia's stock here.