Reports out of Taiwan today are claiming that Nvidia Corp may be exiting the chipset business sometime soon. As of this posting, Nvidia had not retuned calls to EDN for comment, however, analysts here in the United States say that such a move is unlikely.

“Following checks with Nvidia management in the US and Taiwan, it appears that Nvidia remains committed to the chipset business and is currently ramping several new products for the Intel market. We believe Nvidia is likely to remain committed to the chipset business, approximately 17% of sales as part of its broader platform strategy,” Tim Luke, a Lehman Brothers semiconductor market analyst, said in a research note this morning.

Lehman acknowledged that Nvidia continues to be challenged by significant competitive and pricing pressures in its core GPU business. Indeed, while it in Q2 gained back some of its market share lost to AMD (and its ATI acquisition) in recent quarters, the overall GPU market continued its downward trend in the June quarter. According to Jon Peddie Research data released this week, the total GPU market saw shipments of 94.4 million units in Q2, down 0.5% on a sequential basis. That also compared to the same quarter last year when shipments were up a 16%.

Lehman noted that “solid traction” of AMD’s RV 770 and its cost efficiency by using 55 nm has helped AMD regain market share ATI had once lost to Nvidia. As a result of share pressure, Nvidia had cut prices for some of its discrete GPUs by 20 to 30%.

Lehman also noted Nvidia’s recent negative preannouncement, stating an expected $150 million to $200 million product-issue charge in its fiscal Q2 2009, for which it will report earnings on August 12.

“Longer term, however, we consider that Nvidia positioning as a leader in graphics remains solid,” Luke said.

“Initially Nvidia supplied chipsets only to AMD, and has started supplying chipsets for Intel CPUs, as well, since Q4 2007. Over time, we have expected sales of chipsets to AMD to decline following AMD's acquisition of chipset and graphics rival ATI,” Luke continued. “We note that Nvidia is expected to ramp chipsets with Intel motherboard partners such as HP and Dell going forward with incremental opportunities at vendors such as Apple going forward.”

Note Luke’s Apple comment. Rumors have started to spread that Apple may be dumping Intel as its Macintosh computer chip partner. Such a move would not be unusual for Apple. Even this Mac lover will admit that the company is known to use a partner for a while, demanding dirt cheap deals, and then move on (just ask anyone from PortalPlayer). And although industry observers have stated that Apple is happy with Intel, the iPhone maker has already snubbed Intel’s Atom in its iPhone and did purchase its own chip maker, PA Semi, a company with background in PowerPC architecture CPUs, in April for $278 million. As of this posting, Apple had not retuned calls to EDN for comment.

So what do you think? Will Nvidia exit the chipset business sometime soon? Is Apple done with Intel and will Nvidia soon see new opportunity from that? Post your comments below.

--Suzanne Deffree, Managing Editor, News