Nvidia Set to Radically Change Business Model, License Graphics Cores to Others

From X-bit Labs: Nvidia Corp. on Tuesday announced plans to alter its business model considerably. From a developer of supplier of chips and products on their base, the company wants to become a technology licensee ad adopt business model akin to that of ARM Holdings as well as Imagination Technologies.

PC sales are declining with the rise of smartphones and tablets. Yesterday’s PC industry, which produced several hundred million units a year, will soon become a computing-devices industry that produces many billions of units a year with visual computing is at the epicenter of it all. The consequences of these changes are apparent everywhere. New industry leaders are emerging. Companies differentiate not only on products but on business models. Some create systems from industry-standard chips. Others are vertically integrated and build their own chips, systems, software and even services. Some do both.

For chip-makers like Nvidia that invent fundamental advances, this disruption provides an opening to expand their business model. Not so long ago, Nvidia only made and sold GPU chips. Five years ago, it introduced Tegra, a system on a chip. More recently, Grid – a complete system that streams cloud games and other graphics-rich content – as well as the Shield gaming portable have been unveiled.

“But it is not practical to build silicon or systems to address every part of the expanding market. Adopting a new business approach will allow us to address the universe of devices. So, our next step is to license our GPU cores and visual computing patent portfolio to device manufacturers to serve the needs of a large piece of the market,” a statement by Nvidia reads.

It is noteworthy that Nvidia has done something similar in the past: it licensed an earlier GPU core to Sony for the PlayStation 3 and receive more than $250 million a year from Intel as a license fee for its visual computing patents. Now, the explosion of Google Android-based devices presents an unprecedented opportunity to accelerate this effort.

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