Nvidia Kepler Yields Lower Than Expected – Chief Executive Officer

From X-bit Labs: Chief executive officer of Nvidia Corp. said that besides continuously increasing capital expenditures that the company ran into in the recent months will be accompanied by lower than expected gross margins in the forthcoming quarter. The company blames low yields of the next-generation code-named Kepler graphics chips that are made at TSMC’s 28nm node.

“Decline [of gross margin] in Q1 is expected to be due to the hard disk drive shortage continuing, as well as a shortage of 28nm wafers. We are ramping our Kepler generation very hard, and we could use more wafers. The gross margin decline is contributed almost entirely to the yields of 28nm being lower than expected. That is, I guess, unsurprising at this point,” said Jen-Hsun Huang, chief executive officer of Nvidia, during a conference call with financial analysts.

Nvidia’s operating expenses have been increasing for about a year now: from $329.6 million in Q1 FY2012 to $367.7 million in Q4 FY2012 and expects OpEx to be around $383 million in the ongoing Q1 FY2013. At the same time, the company expects its gross margins in Q1 FY2013 to decline below 50% for the first time in many quarters to 49.2%.

Nvidia has very high expectations for its Kepler generation of graphics processing units (GPUs). The company claims that it had signed contracts to supply mobile versions of GeForce “Kepler” chips with every single PC OEM in the world. In fact, Nvidia says Kepler is the best graphics processor ever designed by the company.

[With Kepler, we] won design wins at virtually every single PC OEM in the world. So, this is probably the best GPU we have ever built and the performance and power efficiency is surely the best that we have ever created,” said Mr. Huang.

Unfortunately for Nvidia, yields of Kepler are lower than the company originally anticipated and therefore their costs are high. Chief exec of Nvidia remains optimistic and claims that the situation with Fermi ramp up was ever worse than that.

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