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Nvidia covers costs for faulty chips

Posted: 04 Jul 2008 ?? ?Print Version ?Bookmark and Share

Keywords:Nvidia faulty chip? graphics processor? packaging material?

Graphics processor provider Nvidia Corp. plans to take a charge from $150-to-$200 million to cover anticipated warranty, repair, return, replacement and other costs arising from a "weak die/packaging material" in select devices.

According to an Nvidia spokesman, the "packaging [material] was supplied by TSMC [Taiwan Semiconductor Manufacturing Co. Ltd]," its foundry partner which is doing some level of IC packaging for Nvidia.

The suspect material was used in select graphics processors and media communications processors (MCP) used in notebook systems. Certain notebook configurations with the suspect devices "are failing in the field at higher than normal rates," according to Nvidia.

Nvidia, which did not elaborate, will take the charge in Q2. The company will also seek to access insurance coverage for this matter.

"We didn't recall any chips," the spokesman said. "We've replaced the products. We've changed our packaging and we've developed and distributed a software driver to help avoid the failures."

To date, abnormal failure rates with systems other than certain notebook systems have not been seen.

Taking responsibility
"Although the failure appears related to the combination of the interaction between the chip material set and system design, we have a responsibility to our customers and will take our part in resolving this problem," said Nvidia president and CEO Jen-Hsun Huang, in a statement.

"This has been a challenging experience for us," he added. "As for the present, we have switched production to a more robust die/package material set and are working proactively with our OEM partners to develop system management software that will provide better thermal management to the GPU."

Revised guidance
As a result, Q2 revenue and gross margin are expected to be lower than guidance provided during Q1 financial conference call held May 8.

Total revenue is now estimated to be from $875 million to $950 million. Analysts expected to see sales of $1.1 billion and a profit of $0.34 a share.

"The estimated decrease in revenue and gross margin is due to several reasons: end-market weakness around the world, the delayed ramp of a next generation MCP, and price adjustments of our GPU products to respond to competitive products," according to the company.

- Mark LaPedus
EE Times

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