3. Nvidia Threats It Could Ban Larrabee from Entering the Market
Nvidia Corp. claimed in late March that it could terminate its cross-licensing agreement with Intel Corp., which would prevent the latter from launching its first discrete graphics processor in ten years. Besides, claims Nvidia, Intel utilizes Nvidia’s intellectual property in every integrated graphics core it ships.
Nvidia believes that Intel is using Nvidia IP in currently shipping IGP products and the company also believes that Intel would not be able to develop its Larrabee graphics chips without making use of Nvidia's IP portfolio. Nvidia may ask the courts to terminate Intel's rights to these IPs in the event that it is found that Intel is in breach of contract,” Drew Henry, the head of Nvidia’s core-logic business unit, is reported to have said in an interview.
Nobody, except those who work at Intel Corp. or certain software developers, knows what Intel’s code-named Larrabee discrete graphics processing unit actually is, but it may seem that Nvidia is quite concerned about it.
In fact, Nvidia is presently more concerned about its own chipset business: it cannot develop core-logic sets for Intel’s new-generation microprocessors with integrated memory controllers (at least now), AMD is gradually forcing Nvidia out of the AMD-compatible chipset market and Intel is about to start to progressively replace Intel Core 2 Duo and derivatives with new processors that have built-in memory controllers and/or graphics cores.
In Q4 2009 even Intel’s low-cost Atom platform will start to integrate memory controller and graphics/video processors onto the CPU itself, which makes Nvidia Ion and even Ion 2 practically useless for the vast majority of end-users and netbook manufacturers. Moreover, Intel’s aggressive ramp of desktop code-named Clarkdale processor with integrated graphics (potentially, nothing prevents Intel from quick ramp of similar Arrandale chip) will quickly leave Nvidia without business in the low-cost desktops. For Nvidia, all this means that it will have to cease development of core-logic sets. Therefore, the attack on Larrabee and cross-licensing agreement could be a way to slowdown Intel’s expansion onto the desktop/laptop graphics business.
What Nvidia needs to do, and what the company seemingly is doing, is to develop ultra low-cost graphics processing units that will enable graphics cards for $30 - $40 in retail. This will allow Nvidia to claim huge performance benefit over Intel's integrated graphics and potentially minimize the loss of market share.
It is unlikely that Nvidia will terminate cross-licensing agreement with Intel and it is even more unlikely that such a termination would cause Intel to stop selling its integrated graphics cores or Larrabee. After Nvidia terminates the agreement, it will have to sue Intel and then wait for years till the court orders the chip giant to stop using Nvidia's intellectual property. In several years time the products that may infringe Nvidia's patents will most likely be absent from Intel's product range. Moreover, Intel may file a counter-lawsuit against Nvidia, which result might be another cross-licensing agreement between the two companies.
All-in-all, Nvidia will hardly terminate the cross-licensing agreement with Intel, but threatening Intel with this may allow Nvidia to remain in Intel-compatible business.