Graphics chip designer NVIDIA Corp. has reportedly postponed deliveries of uncut wafers with entry-level chip cores and asked its foundry partner TSMC to hold the inventory in its own stock. The decision indicates growing pressure of Intel and ATI on NVIDIA’s entry-level products on the market.

Taiwanese web-site DigiTimes reports that NVIDIA had asked its ally contract chipmaker TSMC to hold 20 thousand of uncut wafers of the GeForce FX 5200 graphics processing units instead of sending them to companies dealing with testing and packaging in an attempt to avoid excessive production of entry-level chips. The web-site notes that inventories of NVIDIA’s entry-level graphics chips, including the GeForce MX4000 and GeForce FX5200, held by the chipmaker, graphics card makers and Taiwan distributors currently total about five million units, or just slightly less than the six million chips NVIDIA ships quarterly.

During the most recent conference call with financial analysts Santa Clara, California-based NVIDIA’s management indicated that the company’s revenue was affected by increasing pricing pressure from arch-rival ATI Technologies in the low-end segment as well as more competitive, i915G with GMA900 core, integrated graphics offering from Intel Corp.. Compared to the first quarter of fiscal 2005 NVIDIA’s inventory levels rose about $30 million to approximately $266.985 million by late Q2 FY2005.

Due to oversupply of NVIDIA’s entry-level products their price in the channel decreased 10% to 20% to $11-$12 and $16 for GeForce MX4000 and the GeForce FX 5200 chip respectively.

It is yet unclear how the decision to store uncut wafers at TSMC will affect NVIDIA’s financials and business.